8-K: E.W. Scripps Company Achieves Record Revenue in Q3 2024 Driven by Political Ads

The E.W. Scripps Company reported record third-quarter revenue of $646 million, fueled by unprecedented political advertising revenue and effective cost management.

Summary

• The E.W. Scripps Company announced record revenue of $646 million for the third quarter of 2024, primarily driven by record political advertising revenue.
• The company's income attributable to shareholders was $33 million, or 37 cents per share.
• Political advertising revenue is expected to reach at least $340 million for the full year, significantly exceeding previous guidance of $270-$290 million.
• The Local Media division saw a 26% increase in revenue, reaching $446 million, while the Scripps Networks division experienced a 6.4% decrease in revenue to $202 million.
• The company reduced its debt by $115 million in Q3 and expects to pay down approximately $300 million in debt for the full year.
• Scripps ended the quarter with a leverage ratio of 5.1x, a significant improvement from 6.0x at the end of Q2.
• The company anticipates further deleveraging to the high-4x range by year-end.
• Scripps Networks is expected to see a high single-digit percent decline in expenses for the fourth quarter.
• The company's full-season 2024 WNBA revenue doubled compared to the 2023 season.
• The company did not declare or pay any 2024 quarterly preferred stock dividends to prioritize debt reduction.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to record revenue, strong political advertising performance, significant debt reduction, and improved leverage ratio. The company's forward-looking statements are also optimistic, indicating a positive outlook for future performance.

Positives

• Record third-quarter revenue was achieved, driven by strong political advertising.
• The company significantly exceeded expectations for third-quarter EBITDA.
• Debt was reduced by $115 million in Q3 and is expected to be reduced by $300 million for the full year.
• The leverage ratio improved significantly from 6.0x to 5.1x.
• Scripps Networks is managing expenses effectively, with a nearly 4% decline in Q3 and a larger decline expected in Q4.
• WNBA revenue doubled year-over-year, demonstrating the value of the platform for attracting key demographics.
• Local Media segment profit increased significantly to $161 million, compared to $75 million in the prior year quarter.
• The company expects a Scripps Networks margin improvement of at least 400-600 basis points in 2025.

Negatives

• Core advertising revenue in the Local Media segment decreased by 9.2% due to displacement from political advertising.
• Scripps Networks revenue decreased by 6.4% compared to the prior-year quarter.
• Distribution revenue in the Local Media segment decreased by 5.7% compared to the prior-year quarter.
• The company did not declare or pay any 2024 quarterly preferred stock dividends.
• The dividend rate on the preferred shares increased to 9% per annum.

Risks

• The company's performance is heavily reliant on political advertising revenue, which can be volatile.
• Core advertising revenue is being displaced by political advertising, which could impact future revenue streams.
• The company is prohibited from paying dividends on or repurchasing common shares until all preferred shares are redeemed.
• The company faces risks related to changes in advertising demand, audience fragmentation, and loss of affiliation agreements.
• The company's ability to manage its outstanding debt obligations is a key risk factor.

Future Outlook

The company expects to continue deleveraging to the high-4x range by year-end and anticipates operating performance improvement into next year, including a Scripps Networks margin improvement of at least 400-600 basis points in 2025.

Management Comments

• Scripps Local Media political advertising revenue came in nearly 30% higher than our last presidential-election year political revenue, which also was a record year.
• This 2024 level is a testament to the durability of local broadcast programming as the perfect vehicle for massive reach to deliver candidate and political action committee messaging.
• Our local news has always been a go-to for political advertising.
• This time around, our sports programming created significant additional opportunities for campaigns to efficiently and effectively reach voters, further boosting our political advertising revenue.
• Scripps record political advertising revenue translated to record third-quarter company revenue this year and combined with prudent expense management to help us significantly exceed expectations for third-quarter EBITDA.
• These results helped drive our leverage ratio down by nearly a full turn, from 6.0x in the second quarter to 5.1x at the end of the third.
• And with a strong finish to political and our fourth-quarter performance, we expect to continue to deleverage to the high-4x range by year-end.
• Through continued expense management and prudent growth initiatives, we expect our operating performance improvement will continue into next year across the enterprise, including a Scripps Networks margin improvement of at least 400-600 basis points in 2025.
• I hope its clear that we are effectively executing a plan to improve our operating performance and manage down the companys debt to better position Scripps for future growth.

Industry Context

The strong political advertising revenue reflects the continued importance of local broadcast media in political campaigns, while the growth in WNBA viewership highlights the potential of sports programming to attract key demographics. The company's focus on debt reduction aligns with a broader industry trend of improving financial stability.

Comparison to Industry Standards

• The E.W. Scripps Company's record political advertising revenue significantly outperforms typical non-election year results, demonstrating the company's strong position in local media.
• The company's debt reduction efforts are comparable to other media companies seeking to improve their balance sheets.
• The leverage ratio improvement from 6.0x to 5.1x is a positive sign, moving closer to industry benchmarks for financial health.
• The expected Scripps Networks margin improvement of 400-600 basis points in 2025 is a significant target, indicating a focus on operational efficiency.
• While the company's core advertising revenue declined, this is a common trend in the industry as political advertising often displaces other ad buys during election cycles.

Stakeholder Impact

• Shareholders will benefit from the improved financial performance and debt reduction.
• Employees may see increased job security due to the company's improved financial health.
• Customers may benefit from the company's continued investment in quality programming.
• Creditors will benefit from the company's debt reduction efforts.
• Suppliers may see increased business opportunities due to the company's growth.

Next Steps

• The company will continue to focus on debt reduction and deleveraging.
• Scripps will continue to manage expenses and pursue growth initiatives.
• The company will hold a conference call to discuss the quarterly results.
• The company will continue to monitor and adapt to changes in the media landscape.

Key Dates

Keywords

political advertising, revenue, debt reduction, EBITDA, leverage ratio, Scripps Networks, Local Media, WNBA, financial results, broadcasting