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Strong sales execution bolstered Scripps’ Q1 results as ad markets began to rebound

May 7, 2021 By Carolyn Micheli

Local Media core advertising continued post-election momentum; Scripps Networks delivered as promised in first quarter as a division

CINCINNATI – In the first quarter of 2021, The E.W. Scripps Company (NASDAQ: SSP) completed its acquisition of national broadcast network ION, sold digital audio firm Triton and announced plans to redeem $400 million in bonds while delivering record company revenue.

  • First-quarter Local Media core advertising outperformed expectations, up 2% on an adjusted-combined basis, driven by a rebound in the advertising market and strong sales execution. The top five core advertising categories were up on a year-over-year basis in March.
  • The new Scripps Networks division met expectations on Q1 revenue, flat to Q1 2020 on an adjusted-combined basis, with margins of 43%. The networks are having a strong upfront season, attracting new advertisers, and also have seen strong demand and rate growth in direct response advertising. The division is on track to realize the synergies it identified related to the ION acquisition.
  • On Jan. 7, Scripps closed on the acquisition of ION and combined it with Court TV, Newsy, Bounce, Grit, Laff and Court TV Mystery to create the Scripps Networks division. The new national networks portfolio comes together to offer advertisers a large nationwide audience of media consumers who include free over-the-air television in their self-made viewing bundles.
  • On March 31, Scripps closed on the sale of Triton. iHeart Media purchased Triton for $230 million, representing 1.6 times cash-on-cash return for Scripps.
  • On April 15, Scripps announced its plans to redeem all $400 million in aggregate principal of its outstanding 2025 senior notes on May 15, underscoring Scripps’ priority to reduce its debt.

“During the first quarter, our Local Media and Scripps Networks divisions capitalized on the resurgence of the local and national TV advertising marketplaces with strong sales execution and drove an exceptionally strong start to the year,” Scripps President and CEO Adam Symson said.

“In Local Media, service-oriented local business advertising continued its momentum from the end of 2020, and we saw significant growth in advertising tied to the number of states legalizing sports betting as well as meaningful new advertising business developed by our sales teams. The re-opening of economies as Americans receive vaccines for COVID-19 combined with the distribution of federal stimulus dollars is driving activity experts project will fuel ad spending throughout the year.

“Retransmission revenue grew 15% (adjusted combined) as we annualize a big reset in household rates last year and due to stabilization of pay TV household counts in the most recent reporting period.

“In our new Scripps Networks division, we are gaining strong traction in the upfront and scatter markets as well as continued growth in direct response advertising demand and rates. We delivered Q1 margins of more than 40% and expect to maintain margins this year in the 40% range (adjusted combined), other than a dip in the third quarter as we invest in the launch of the new networks Defy TV and True Real and prepare to deploy Newsy over the air.

“The foundation of our acquisition of ION and the creation of our OTA powerhouse networks portfolio is growth in free, over-the-air television viewing that consumers pair with subscription streaming services. Television is a high-free-cash-flow business, and Scripps is creating value today from our two highly profitable operating divisions even as we prepare to capitalize on future industry growth.”

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. Our Scripps Networks segment is comprised of ION, Katz and Newsy. 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 first-quarter company revenue was $541 million, an increase of 31% or $127 million from the prior-year quarter, which had included $18.7 million of political revenue.

Costs and expenses for segments, shared services and corporate were $408 million, up from $360 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 $8.1 million or 10 cents per share. The current-year quarter included an $81.8 million gain from the sale of Triton, a $67.2 million non-cash adjustment due to the increase in the fair value of the outstanding common stock warrant liability as our stock price rose during the first quarter, acquisition and related integration costs of $28.6 million and $7.1 million of restructuring costs. These items decreased income from continuing operations by $29.3 million, net of taxes, or 36 cents per share. In the prior-year quarter, loss from continuing operations was $7.2 million or 9 cents per share. Pre-tax costs for the prior-year quarter included $4.9 million of acquisition and related integration costs that increased the loss from continuing operations by $3.7 million, net of taxes, or 5 cents per share.

First-quarter 2021 as-reported results by segment compared to prior-period amounts were:

Local Media 
Revenue from Local Media was $313 million, down 3.8% from the prior-year quarter.

Core advertising revenue decreased 5.2% to $152 million, primarily reflecting the fourth-quarter 2020 sale of WPIX-TV in New York City. The COVID-19 pandemic reduced our core advertising revenue by about $8 million in the first quarter of 2020.

Political revenue was $1.3 million, compared to $18.7 million in the prior-year quarter.

Retransmission revenue increased 11% to $156 million. Scripps renegotiated three large retransmission consent contracts in 2020.

Total segment expenses decreased 3.5% to $257 million, primarily driven by a reduction in expenses as a result of the sale of WPIX. Additionally, toward the end of the first quarter of 2020, Scripps implemented cost-saving initiatives in response to the weakened economic conditions created by COVID-19.

Segment profit was $55.9 million, compared to $59.1 million in the year-ago quarter.

Scripps Networks 
First-quarter revenue from Scripps Networks was $214 million. Expenses for Scripps Networks were $121 million. Segment profit was $92.2 million.

First-quarter 2021 adjusted-combined results by segment compared to prior-period amounts were:

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 $313 million, up $6.8 million or 2.2% from the prior-year quarter.

Core advertising rose 2.3% to $152 million. The COVID-19 pandemic reduced our core advertising revenue by about $8 million in the first quarter of 2020.

Political advertising revenue was $17.9 million in the first quarter of 2020 compared to $1.3 million in the current period.

Retransmission revenue increased 15%. Scripps renegotiated three large retransmission consent contracts in 2020.

Total segment expenses on an adjusted combined basis increased 3%.

Segment profit was $55.9 million, compared to $56.6 million in the year-ago quarter.

Scripps Networks – Adjusted-Combined Basis

Adjusted-combined revenue from Scripps Networks was $220 million, down $1.6 million or 0.7% from the prior-year quarter.

Total segment expenses decreased 3.3%.

Segment profit was $95.2 million, compared to $92.5 million in the year-ago quarter.

Financial condition 
On March 31, cash and cash equivalents totaled $538 million while total debt was $3.8 billion.

On Jan. 7, the company issued an $800 million term loan and received $600 million of financing from Berkshire Hathaway, Inc. in exchange for series A preferred shares. The proceeds from these transactions, in combination with the $1.05 billion of bonds issued on Dec. 30, 2020, and other cash on hand, provided the financing for the ION acquisition. Under the terms of Berkshire Hathaway’s preferred equity investment, Scripps will be prohibited from paying dividends and purchasing its shares until all preferred shares are redeemed.

On April 15, the company said it will redeem the $400 million 2025 senior notes on May 15. The redemption price will be equal to 102.563% of the aggregate principal amount plus accrued and unpaid interest up to the redemption date. The notes will be redeemed with cash on hand.

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.

  Second-quarter 2021
Local Media revenue Up high teens
Local Media expense Up low to mid-teens
Scripps Networks revenue Up about 20%
Scripps Networks expense Up about 10%
Shared services and corporate About $20 million
  Full-year 2021
Interest cash outlay Between $120-$125 million
Net tax cash outlay Between $85-$90 million
Pension contribution About $25 million
Capex (excluding repack) Between $65-$70 million
Depreciation & Amortization About $150 million
Free cash flow Between $210-$240 million

Conference call
The senior management of The E.W. Scripps Company will discuss the company’s first-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 (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 May 7 until midnight May 21. 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 1165507.

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-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 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 and Court TV Mystery. 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.”

Investor contact: 
Carolyn Micheli, The E.W. Scripps Company, 513-977-3732, Carolyn.micheli@scripps.com

Media contact: 
Kari Wethington, The E.W. Scripps Company, 513-977-3763, Kari.wethington@scripps.com