(Note: The acquisition of 15 television stations from Cordillera Communications occurred on May 1, 2019. Results for the Local Media division are presented below both as reported and on an adjusted combined basis as though the stations acquired from Cordillera and Raycom had closed Jan. 1, 2018.)
CINCINNATI – The E.W. Scripps Company (NASDAQ: SSP) today reported operating results for the second quarter of 2019. Unless otherwise indicated, all operating results comparisons are to the Scripps historical results for the second quarter of 2018.
Total revenue was $337 million compared to $283 million in second-quarter 2018.
Loss from continuing operations was $400,000 or 1 cent per share. Pre-tax costs for the current quarter included $2.8 million of acquisition and related integration costs and $1 million of restructuring charges that increased the loss by $2.8 million, net of taxes, or 3 cents per share. In the prior-year quarter, income from continuing operations was $8.7 million or 10 cents per share. The 2018 quarter included $2.3 million of restructuring costs that decreased income from continuing operations by $1.7 million or 2 cents per share.
Business highlights
Commenting on the business highlights, Scripps President and CEO Adam Symson said:
“We were very pleased to deliver stronger-than-expected financial results in the second quarter, including higher company segment profit and better earnings per share. Improving our short-term operating results has been one of our highest priorities over the last two years, and we have steadily executed on our plan.
“Also instrumental to our short-term performance improvement plan is our aggressive pursuit of a clearly articulated M&A strategy that will help us build a more powerful and durable portfolio of television stations. With the transactions we have announced or completed in the last seven months, we will emerge as the fourth-largest independent local broadcaster, enhancing our financial durability and vastly improving cash flow generation.
“We soon will have 26 television stations in the top 50 markets as well as tremendous geographic diversity, giving us a strong and varied economic base. We added more highly-ranked stations as well as second stations in more of our markets. We positioned ourselves to take further advantage of our expertise in political advertising by forming one of the strongest TV station footprints. We also repositioned ourselves just ahead of renegotiating retransmission household rates for about 50 percent of our cable and satellite households over the next year. With the close of the Nexstar divested stations, we will have accomplished what we set out to do.
“We were extremely pleased with the terms of our financing vehicles for these acquisitions. Both saw strong demand that drove an attractive interest rate for us and allowed us to upsize the facilities. Our highest priority is now on paying down debt – which we expect to be greatly aided by 2020 cash flow – to quickly return to our more typical historical levels of company leverage.
“In our National Media businesses, we have been pleased with the sustained robust revenue growth. Katz, Stitcher and Newsy in particular delivered second-quarter growth that helped drive the segment’s profitability well beyond our expectations.
“Looking to the back half of the year, our focus remains on producing strong financial results and aggressively executing our strategies to build long-term value across our many consumer media platforms while also improving our near-term operating performance.”
Second-quarter operating results
Revenue was $337 million, an increase of 19% or $54 million from the prior-year quarter. That includes revenue from Triton, acquired Nov. 30, 2018, of $9.9 million, and revenues from the television stations acquired from Raycom Media, effective Jan. 1, and from Cordillera Communications, effective May 1, totaling $31.3 million.
Costs and expenses for segments, shared services and corporate were $291 million, up from $243 million in the year-ago period, reflecting the impact of the acquisitions, higher network programming fees and continued investment in programming at the Katz networks and Stitcher.
Second-quarter 2019 results by segment compared to prior-period amounts were:
Local Media – As Reported Basis
Revenue from Local Media was $237 million, up 11% from the prior-year quarter.
Retransmission revenue increased 24% to $91.5 million.
Core advertising increased 15% to $140 million due to the impact of the television stations acquired from Raycom and Cordillera. Political revenues declined $13 million during this non-election year.
Total segment expenses increased 14% to $182 million, primarily driven by increases in programming fees tied to network affiliation agreements and the impact of the television stations acquired from Raycom and Cordillera.
Segment profit was $54.3 million, compared to $53.4 million in the year-ago quarter.
Local Media – 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 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 2018. Refer to the “Supplemental Information” section that begins on page E-7 of the attached tables.
Adjusted combined revenue from Local Media was $249 million, down 4.3% from the prior-year quarter.
The decrease in revenue on an adjusted combined basis was driven by a $19 million decline in political advertising during this non-election year. This was partially offset by an increase in retransmission revenue of 10%. Core advertising was down slightly from the prior-year quarter but up 1% factoring out the incremental revenue of the Cleveland Cavaliers’ 2018 NBA Finals appearance.
Total segment expenses on an adjusted combined basis increased slightly to $191 million, primarily driven by increases in programming fees tied to network affiliation agreements offset by a decline in other expenses.
Adjusted combined segment profit was $57.5 million, compared to $71 million in the year-ago quarter.
National Media – As Reported Basis
Revenue from National Media was $98.5 million, up from $68.2 million in the prior-year period.
Expenses for National Media were $91.9 million, up from $66.2 million in the prior-year period. The increase was driven by the acquisition of Triton, which was completed in the fourth quarter of 2018, as well as investments in the Katz networks, Stitcher and Newsy.
Segment profit was $6.6 million, compared to $2 million in the 2018 quarter.
Financial condition
On June 30, cash and cash equivalents totaled $56.5 million and cash restricted for pending acquisition totaled $240 million, while total debt was $1.58 billion.
No shares were repurchased during the second quarter of 2019. The company made dividend payments totaling $8 million during the first half of the year.
On July 26, our wholly-owned subsidiary, Scripps Escrow, Inc., issued $500 million of senior unsecured notes that mature on July 15, 2027.
Year-to-date operating results
The following comparisons are for the period ending June 30, 2019:
In 2019, revenue was $630 million, which compares to revenue of $538 million in 2018. The 2019 period includes revenue from Triton, acquired Nov. 30, 2018, of $20.4 million, and revenues from the television stations acquired from Raycom Media, effective Jan. 1, and from Cordillera Communications, effective May 1, totaling $36.9 million.
Costs and expenses for segments, shared services and corporate were $561 million, up from $478 million in the year-ago period, reflecting the impact of the acquisitions, higher network programming fees and investment in programming at the Katz networks and Stitcher.
Loss from continuing operations was $7.2 million or 9 cents per share. Pre-tax costs for 2019 included $6.3 million of acquisition and related integration costs and $1.9 million of restructuring charges. In the prior-year period, income from continuing operations attributable to shareholders of the company was $717,000 or 1 cent per share. Pre-tax activity in the 2018 period included $6.1 million of restructuring costs.
Looking ahead
Comparisons are to the same periods of 2018.
Third-quarter 2019
Local Media revenue (pro forma) Down low-to-mid teens
Retransmission revenue (pro forma) Up mid single digits
Local Media expense (pro forma) Up low single digits
National Media revenue Mid $90 million range
National Media expense Low-to-mid $90 million range
Shared services and corporate About $13 million
Interest expense About $26 million
Pension expense About $2 million
Capex (excluding repack) Low-to-mid-teen millions
Depreciation About $10 million
Amortization About $11 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 9:30 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 (800) 230-1059 (U.S.) or (612) 234-9960 (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 11:30 a.m. Eastern time Aug. 9 until 11:59 p.m. Aug. 16. 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 469813.
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 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 the statement is made.
About Scripps
The E.W. Scripps Company (NASDAQ: SSP) serves audiences and businesses through a growing portfolio of local and national media brands. With 52 television stations in 36 markets, Scripps is the nation’s fourth-largest independent TV station owner. Scripps runs a collection of national journalism and content businesses, including Newsy, the next-generation national news network; podcast industry leader Stitcher; the fast-growing national broadcast networks Bounce, Grit, Escape, Laff and Court TV; and Triton, the global leader in digital audio technology and measurement services. 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.”
Investor contact:
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, [email protected]
Media contact:
Kari Wethington, The E.W. Scripps Company, 513-977-3763, [email protected]