Local Media and Scripps Networks revenue, profit outperform as the advertising marketplace rebounds
CINCINNATI – In the second quarter of 2021, The E.W. Scripps Company (NASDAQ: SSP) grew consolidated revenue by 23% over the same period last year on a same-station basis, fueled by the post-lockdown return of the advertising marketplace and strong sales execution.
“Scripps’ second-quarter results for our Local Media and Scripps Networks divisions have surpassed expectations for both revenue and segment profit. Their performance, combined with expectations for a strong second half of the year, have allowed us to raise our full-year free cash flow guidance to $240-$260 million,” Scripps President and CEO Adam Symson said.
“In Local Media, we are delivering core advertising revenue results that reflect very strong sales execution, especially focused on new-to television ad dollars, in the midst of the rebound of the advertising marketplace.
“In our Scripps Networks division, we outpaced our revenue expectations, driven by continued strength in direct response advertising. In addition, our first upfront presentations as a nine-network division exceeded our expectations, with tremendous growth compared to past ION and Katz upfronts, substantial increases in advertising rates and a significant expansion of our advertiser accounts. National advertisers are embracing our powerful networks portfolio’s audience reach.
“Our second-quarter results illustrate the benefits of the company’s strategic approach in recent years to both longer-term transformative change and near-term operating-performance excellence. Our improved financial profile today positions us well for ongoing business growth, future free cash flow generation and the ability to continue reducing our debt.”
Operating results
Effective with the close of the ION acquisition on Jan. 7, 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 recently sold 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 second-quarter company revenue was $565 million, an increase of 57% or $206 million from the prior-year quarter, reflecting the impact of the ION acquisition.
Costs and expenses for segments, shared services and corporate were $413 million, up from $329 million in the year-ago quarter, reflecting the impact of the ION acquisition and higher affiliation fees for both our broadcast television stations and national networks.
Loss from continuing operations attributable to the shareholders of Scripps was $11.4 million or 14 cents per share. The current-year quarter included a $13.8 million loss on extinguishment of debt from the redemption of our 2025 senior notes, a $31.9 million non-cash adjustment due to the increase in the fair value of the outstanding common stock warrant liability as our stock price rose, acquisition and related integration costs of $6.7 million and $514,000 of restructuring costs. These items decreased income from continuing operations by $47.6 million, net of taxes, or 58 cents per share. In the prior-year quarter, loss from continuing operations was $17.5 million or 22 cents per share.
Second-quarter 2021 as-reported results by segment compared to prior-period amounts were:
Local Media
Revenue from Local Media was $325 million, up 16% from the prior-year quarter.
Core advertising revenue increased 38% to $161 million.
Political revenue was $3.2 million, compared to $13.4 million in the prior-year quarter.
Retransmission revenue increased 7.5% to $156 million. Scripps renegotiated three large retransmission consent contracts in 2020.
Total segment expenses increased 6.4% to $260 million, primarily driven by network affiliation fees.
Segment profit was $64.6 million, compared to $35.5 million in the year-ago quarter.
Scripps Networks
Second-quarter revenue from Scripps Networks was $239 million. Expenses for Scripps Networks were $131 million. Segment profit was $107 million.
Second-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 $325 million, up $58.3 million or 22% from the prior-year quarter.
Core advertising rose 48% to $161 million. Weakened economic conditions due to the COVID-19 pandemic slowed advertiser spending in 2020.
Political advertising revenue was $13.1 million in the second quarter of 2020, compared to $3.2 million in the current period.
Retransmission revenue increased 11%. Scripps renegotiated three large retransmission consent contracts in 2020.
Total segment expenses on an adjusted combined basis increased 13%.
Segment profit was $64.6 million, compared to $36.6 million in the year-ago quarter.
Scripps Networks – Adjusted-Combined Basis
Adjusted-combined revenue from Scripps Networks was $239 million, up $45.4 million or 23% from the prior-year quarter.
Total segment expenses increased 7.4%.
Segment profit was $107 million, compared to $71 million in the year-ago quarter.
Financial condition
On June 30, cash and cash equivalents totaled $86 million while total debt was $3.2 billion.
On Jan. 7, 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.
On May 15, the company redeemed $400 million 2025 senior notes for a redemption price equal to 102.563% of the aggregate principal amount and made an additional principal payment on the 2028 term loan totaling $50 million.
Year-to-date operating results
The following comparisons are for the period ending June 30, 2021:
In 2021, revenue was $1.1 billion, which compares to revenue of $773 million in 2020. Political revenue was $32.1 million in 2020.
Costs and expenses for segments, shared services and corporate were $821 million, up from $689 million in the year-ago period, reflecting the impact of the ION acquisition and higher affiliation fees.
Loss from continuing operations attributable to the shareholders of Scripps was $19.5 million or 24 cents per share. The 2021 period included an $81.8 million gain from the sale of Triton, a $13.8 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, acquisition and related integration costs of $35.3 million and $7.6 million of restructuring costs. These items decreased income from continuing operations by $76.9 million, net of taxes, or 94 cents per share. In the prior-year period, loss from continuing operations was $24.7 million or 30 cents per share. Pre-tax costs for the prior year included $5.1 million of acquisition and related integration costs that increased the loss from continuing operations by $3.8 million, net of taxes, or 5 cents per share.
Looking ahead
Comparisons for our segments are to the same period in 2020 on an adjusted-combined basis. Supplemental quarterly adjusted-combined financial results were provided in our 2020 year-end earnings release.
| Third-quarter 2021 | |||
| Local Media revenue | Down mid-teens percent range | ||
| Local Media expense | Up low-double-digit percent range | ||
| Scripps Networks revenue | Up mid-teens percent range | ||
| Scripps Networks expense | Up low-to-mid-teens percent range | ||
| Shared services and corporate | About $19 million | ||
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 3149025 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 Aug. 6 until midnight Aug. 20. 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 3633077.
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.
About Scripps
The E.W. Scripps Company (NASDAQ: SSP) is a diversified media company focused on creating a better-informed world. As the nation’s fourth-largest local TV broadcaster, 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, Grit, Laff, Court TV Mystery, Defy TV 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.”
Contact:
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, [email protected]