(Note: We acquired eight television stations being divested in the Nexstar/Tribune merger on Sept. 19, 2019, and 15 television stations from Cordillera on May 1, 2019. Results for the Local Media division are presented below both as reported and on an adjusted combined basis as though all of those station acquisitions had closed on Jan. 1, 2019.)
CINCINNATI – The E.W. Scripps Company (NASDAQ: SSP) today reported operating results for the third quarter of 2020. Unless otherwise indicated, all operating results comparisons are to the Scripps historical results for the third quarter of 2019.
Beginning in the second quarter of 2020, Scripps’ Stitcher business was classified as discontinued operations in its consolidated financial statements. All periods have been adjusted to reflect this presentation. The Stitcher sale closed on Oct. 16.
During the third quarter, total revenue was $493 million compared to $331 million in third-quarter 2019.
Income from continuing operations was $64 million or 76 cents per share. Pre-tax costs for the 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. In the prior-year quarter, loss from continuing operations was $17.3 million or 22 cents per share. Pre-tax costs for the prior-year quarter included $16.7 million of acquisition and related integration costs that increased the loss from continuing operations by $12.6 million, net of taxes, or 16 cents per share.
Business highlights
Commenting on recent business highlights, Scripps President and CEO Adam Symson said:
“Despite the lingering economic disruption, Scripps achieved record political advertising revenue, nearly 40% retransmission revenue growth, a rebound in core advertising, double-digit National Media revenue growth and a return to National division margin expansion.
“We are now on track to end the year at more than $280 million of free cash flow, or at least $3.42 of free cash flow per share, exceeding the $225-$250 million of 2020 free cash flow guidance we set out in 2019.
“We credit this performance to a recovering advertising marketplace combined with our strategies to become a stronger and more durable enterprise. Our recently announced acquisition of ION Media is another step in our systematic plan to improve the financial profile of the company and increase free cash flow, providing a clear path to debt reduction.
“None of this financial success would be possible without the commitment, focus and hard work of our dedicated Scripps team. Our journalists are serving their audiences well, despite facing hostility and physical danger this year covering protests and election events in the midst of this pandemic. Our sales executives have partnered with local and national businesses to restart the economy. We are grateful for the dedication of our employees, and we all remain firmly committed to exercising our First Amendment rights and serving our audiences and communities.”
Third-quarter operating results
Revenue was $493 million, an increase of 49% or $162 million from the prior-year quarter. That includes incremental revenue from the television stations acquired from the Nexstar transaction with Tribune on Sept. 19, totaling $50 million. Total company political revenue in the quarter was $98.3 million.
Costs and expenses for segments, shared services and corporate were $350 million, up from $287 million in the year-ago quarter, reflecting the impact of the acquisitions and higher network programming fees.
Third-quarter 2020 results by segment compared to prior-period amounts were:
Local Media – As Reported Basis
Revenue from Local Media was $404 million, up 60% from the prior-year quarter.
Retransmission revenue increased 60% to $152 million. During 2020, Scripps has renegotiated three key retransmission consent contracts covering 42% of its subscribers. In addition, on Dec. 31, 2019, the company’s agreement with Comcast reset, covering 5.5 million households.
Core advertising revenue increased 2.2% to $151 million due to the incremental revenue from the television stations acquired from the Nexstar transaction with Tribune.
Third-quarter political revenue was $96.4 million during this election year, compared to $5 million in the prior-year quarter.
Total segment expenses increased 28% to $259 million, primarily driven by increases in programming fees tied to network affiliation agreements and the impact of the television stations acquired from Nexstar/Tribune
Segment profit was $145 million, compared to $49.7 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 Local Media 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 2019. Refer to the “Supplemental Information” section that begins on page E-7 of the attached tables.
Adjusted combined revenue from Local Media was $404 million, up $98.5 million or 32% from the prior-year quarter. Political advertising revenue was $96.4 million in the third quarter.
Core advertising decreased 18%. Excluding the loss of major league baseball games on WPIX in New York, core was down 15%. As the COVID-19 pandemic began to impact advertising markets in mid-March, Scripps began to see ad revenue declines in its local markets. The impact was greatest in April, and the advertising markets have continued to improve since that time. The company expects advertising to continue to recover; however, it expects spending in its local markets to remain below 2019 levels through the remainder of 2020 and into 2021.
Retransmission revenue was up 39%.
Total segment expenses on an adjusted combined basis increased 1.2% but were down 1% when excluding programming expenses. In response to the weakened economic conditions created by COVID-19, the division implemented various cost-savings initiatives through general expense reductions in areas of travel, entertainment and marketing.
Adjusted combined segment profit was $145 million, compared to $49.1 million in the year-ago quarter.
National Media – As Reported Basis
Revenue from National Media was $89.4 million, up from $78.3 million in the prior-year quarter.
Expenses for National Media were $77.3 million, up from $68.6 million in the prior-year quarter, driven by higher expenses directly tied to revenue growth and contractual rate increases at Katz along with the annualization of some expenses at Court TV.
Segment profit was $12.1 million, compared to $9.7 million in the 2019 quarter, as margins have once again begun to expand.
Financial condition
On Sept. 30, cash and cash equivalents totaled $129 million while total debt was $1.9 billion.
The company made dividend payments totaling $12.4 million during the nine months ended Sept. 30, 2020, and has previously indicated it is not buying back shares.
Scripps has suspended issuing new guidance because of the economic uncertainty caused by the COVID-19 pandemic. However, in an effort to provide insights that reflect the current state of affairs and the company’s financial outlook, the third-quarter 10-Q and the earnings call remarks include details about where the company stands operationally and financially. The 10-Q, which will be filed today, includes disclosures related to the outbreak.
Year-to-date operating results
The following comparisons are for the period ending Sept. 30, 2020:
In 2020, revenue was $1.3 billion, which compares to revenue of $928 million in 2019. The 2020 period includes incremental revenue from the television stations acquired from Cordillera Communications on May 1, 2019, and from the Nexstar transaction with Tribune on Sept. 19, 2019, totaling $234 million. Political revenue was $132 million during this election year, compared to $8 million in the prior-year period.
Costs and expenses for segments, shared services and corporate were $1 billion, up from $805 million in the year-ago period, reflecting the impact of the acquisitions, higher network programming fees and the annualization of affiliate fees tied to increased distribution of Court TV.
Income from continuing operations was $39.3 million or 47 cents per share. Pre-tax costs for 2020 included $16.1 million of acquisition and related integration costs that decreased income by $12 million, net of taxes, or 15 cents per share. In the prior-year period, loss from continuing operations was $14.9 million or 19 cents per share. Pre-tax costs for the prior-year period included $23 million of acquisition and related integration costs and $1.9 million of restructuring charges that increased the loss from continuing operations by $18.7 million, net of taxes, or 23 cents per share.
Conference call
The senior management of The E.W. Scripps Company will discuss the company’s results during a telephone conference call at 9:30 a.m. Eastern today. To access the live webcast, visit Scripps – Investor Information and find the link under “upcoming events.”
To access the conference call by telephone, dial (877) 336-4440 (U.S.) or (409) 207-6984 (international) and give the access code 2445354 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 12:30 p.m. Eastern time Nov. 6 until midnight Nov. 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 2676890.
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 Scripps – Investor Information 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 and Form 10-Q, 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 one of the nation’s leading media companies, focused on creating a better-informed world through a portfolio of news, information and entertainment brands. Scripps will become the nation’s largest television broadcaster, reaching 73% of U.S. television households through 108 stations in 76 markets, pending regulatory approval of its acquisition of ION Media. Committed to serving local audiences through objective journalism, Scripps operates 60 local TV stations in 42 markets. It is creating a national TV networks business that will include ION Media’s entertainment programming, Newsy’s straightforward headline and documentary news content and the five popular Katz broadcast networks including Bounce and Court TV. 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]