The company raises free cash flow guide for second time this year due to successful ION integration combined with local sales execution
CINCINNATI – In the third quarter of 2021, The E.W. Scripps Company (NASDAQ: SSP) reported 18% year-over-year, adjusted combined increases in both local core and national networks advertising revenue, fueled by strong sales execution in the midst of the return of the advertising marketplace.
“Investors should take note of the growing financial value of our differentiated strategy, focused on leadership in the free television marketplace. In a year without a major national election season, we again raised our free cash flow guidance range for this year – from $240 million to $260 million up to $255 million to $265 million– driven by the strength of our local and national brands, sales execution and the rebounding advertising marketplace,” Scripps President and CEO Adam Symson said.
“We’ve made fast work of the transformation of the company after the ION acquisition and expanded our portfolio, now with nine national networks that reach more than 90% of the nation’s 122 million TV households – most recently with the relaunch of Newsy over the air in addition to being on all major connected TV platforms.
“At the same time, Scripps is focused on growing scale in the connected TV marketplace through an aggressive launch schedule for most of our networks on CTV platforms. All 40 of our local news brands are already available through the major CTV platforms, garnering material new revenue that helped us beat Wall Street’s core advertising revenue estimates in the third quarter.
“We continue to place a high priority on our people by fostering inclusive, respectful and rewarding workplaces that drive a high-performance culture and engender employee loyalty in a challenging employee economy. This and all of our strategies position us well for ongoing business growth, future free cash flow generation and the ability to continue reducing our debt.”
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 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 third-quarter company revenue was $555 million, an increase of 13% or $62 million from the prior-year quarter, reflecting the impact of the ION acquisition.
Costs and expenses for segments, shared services and corporate were $427 million, up from $350 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.
Income from continuing operations attributable to the shareholders of Scripps was $45.8 million or 49 cents per share. Pre-tax costs for the quarter included acquisition and related integration costs of $251,000 and $1.9 million of restructuring costs. We had a $32.6 million gain on the sale of our Denver KMGH television station building. These items increased income from continuing operations by $22.9 million, net of taxes, or 25 cents per share. In the prior-year quarter, income from continuing operations was $64 million or 76 cents per share. Pre-tax costs for the prior-year quarter included $10.9 million of acquisition and related integration costs that decreased income by $8.2 million, net of taxes, or 10 cents per share.
Third-quarter 2021 as-reported results by segment compared to prior-period amounts:
Revenue from Local Media was $331 million, down 19%.
Core advertising revenue increased 10% to $167 million.
Political revenue was $7.1 million, compared to $96.4 million in the prior-year quarter, which included a presidential election race.
Retransmission revenue decreased 1.2% to $153 million.
Segment expenses increased 2.6% to $266 million, primarily driven by network affiliation fees.
Segment profit was $65.4 million, compared to $148 million in the year-ago quarter.
Third-quarter revenue from Scripps Networks was $227 million. Expenses for Scripps Networks were $143 million. Segment profit was $83.3 million.
Third-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 $331 million, down $60.1 million or 15% from the prior-year quarter.
Core advertising rose 18% to $167 million. Weakened economic conditions due to the COVID-19 pandemic slowed advertiser spending in 2020.
Political advertising revenue was $96.4 million in the third quarter of 2020, which included a presidential election race, compared to $7.1 million in the current period.
Retransmission revenue increased 1.5%.
Segment expenses increased 9.7%.
Segment profit was $65.4 million, compared to $149 million in the year-ago quarter.
Scripps Networks – Adjusted-Combined Basis
Adjusted-combined revenue from Scripps Networks was $227 million, up $34.3 million or 18% from the prior-year quarter.
Segment expenses increased 11%.
Segment profit was $83.3 million, compared to $63.6 million in the year-ago quarter.
On Sept. 30, cash and cash equivalents totaled $106.5 million. That amount includes $34.3 million in proceeds from the sale of the KMGH building in Denver that will be restricted until January 2022. Total debt was $3.3 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. During the year, we made additional principal payments on the 2028 term loan totaling $100 million.
Year-to-date operating results
The following comparisons are for the period ending Sept. 30, 2021:
In 2021, revenue was $1.7 billion, which compares to revenue of $1.3 billion in 2020. Political revenue was $132 million in 2020.
Costs and expenses for segments, shared services and corporate were $1.2 billion, up from
$1 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 $26.3 million or 29 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 $35.6 million, $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 $54.1 million, net of taxes, or 62 cents per share. In the prior-year period, income from continuing operations was $39.3 million or 47 cents per share. Pre-tax costs for the prior year included $16.1 million of acquisition and related integration costs that decreased the income from continuing operations by $12 million, net of taxes, or 15 cents per share.
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.
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 Nov. 5 until midnight Nov. 19. 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 2401632.
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.”
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.
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.”
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, Carolyn.email@example.com