8-K: E.W. Scripps Company Exceeds Political Ad Revenue Expectations in Q2 2024, Raises Full-Year Outlook

The E.W. Scripps Company reported a strong second quarter in 2024, driven by better-than-expected political advertising revenue and increased viewership in women's sports, while also making progress on debt reduction and asset sales.

Summary

• The E.W. Scripps Company reported $574 million in revenue for the second quarter of 2024, a slight decrease of 1.6% compared to the same period last year.
• The company experienced a net loss attributable to shareholders of $13 million, or 15 cents per share, which is a significant improvement from the $682 million loss in the prior year quarter.
• Local Media political advertising revenue was $28.2 million, much stronger than expected, contributing to a 40% growth in the first half of the year compared to 2020.
• Scripps has increased its full-year 2024 political advertising revenue outlook to $270-$290 million, up from the previous range of $240-$270 million.
• The company's Scripps Networks division saw a 9.7% decrease in revenue, while the Local Media segment experienced a 3.6% increase.
• Scripps is making progress on the divestiture of the Bounce television network, which has seen a 14% compound annual growth rate in viewership and revenue since 2017.
• The company is also seeing success in its women's sports strategy, with WNBA viewership and revenue up significantly.
• Scripps reduced its revolving credit facility by $40 million and made $7.8 million in mandatory principal payments on term loans in the first six months of 2024.
• The company did not declare or pay the 2024 quarterly preferred stock dividends, which will allow for better flexibility in accelerating debt reduction.
• The dividend rate on the preferred shares increased to 9% per annum.

Sentiment

Score: 7

Explanation: The sentiment is positive due to the strong political ad revenue, increased outlook, and progress on debt reduction. However, the overall revenue decline and net loss temper the enthusiasm.

Positives

• Political advertising revenue in Local Media exceeded expectations, driving a 40% growth in the first half of the year compared to 2020.
• The company has increased its full-year political advertising revenue outlook.
• Scripps is seeing success with its women's sports strategy, particularly with the WNBA.
• The company is making progress on debt reduction and asset sales.
• Expenses met or bettered expectations in the second quarter through tight expense management.
• The company is seeing better performance in the current national advertising upfront sales cycle.
• The company is confident in its ability to significantly reduce debt by the end of the year.

Negatives

• Total company revenue decreased by 1.6% compared to the prior-year quarter.
• The company reported a net loss of $13 million for the quarter.
• Core advertising revenue in Local Media decreased by 6.9%.
• Scripps Networks revenue decreased by 9.7% compared to the prior-year quarter.
• The company did not declare or pay the 2024 quarterly preferred stock dividends.
• The company has $2.9 billion in total debt.

Risks

• The company's actual results may differ materially from forward-looking statements due to various factors.
• Changes in advertising demand and audience fragmentation could impact revenue.
• Loss of affiliation agreements or distribution revenue could negatively affect the company.
• Increases in programming costs could impact profitability.
• The company's ability to manage its outstanding debt obligations is a risk.
• The company is prohibited from paying dividends on or repurchasing common shares until all preferred shares are redeemed.

Future Outlook

The company expects Local Media revenue to be up about 20 percent in Q3 2024, while Scripps Networks revenue is expected to be down mid-single digits. The company anticipates significant debt paydown by year-end and has updated its full-year 2024 guidance for interest paid, capital expenditures, and taxes paid.

Management Comments

• Adam Symson, President and CEO, stated that Local Media political advertising revenue came in much stronger than expected.
• Adam Symson noted that election spending remains robust for the U.S. Senate races in Montana and Ohio.
• Adam Symson mentioned that the company is beginning to see additional upside from Vice President Kamala Harris's entry into the presidential race.
• Adam Symson stated that the company sees a clear path to significant debt paydown by year end.
• Adam Symson mentioned that the company is progressing nicely with efforts to sell the Bounce TV network and some non-strategic real estate assets.

Industry Context

The increase in political advertising revenue reflects the current election cycle and the importance of local media in political campaigns. The success of the company's women's sports strategy aligns with the growing popularity of women's sports and the increasing demand for related content. The company's focus on debt reduction is consistent with broader industry trends of financial prudence and deleveraging.

Comparison to Industry Standards

• The increase in political advertising revenue is consistent with other broadcasters during election years, however, the specific increase of 40% in the first half of the year compared to 2020 is notable.
• The growth in WNBA viewership and revenue is a positive sign, as it indicates the company is capitalizing on the growing popularity of women's sports, similar to other media companies investing in this area.
• The company's debt level of $2.9 billion is significant and will need to be monitored against industry benchmarks for leverage ratios.
• The company's focus on selling non-core assets is a common strategy for media companies looking to streamline operations and improve financial health, similar to other companies divesting assets to focus on core business.

Stakeholder Impact

• Shareholders will be impacted by the company's financial performance and debt reduction efforts.
• Employees may be affected by the company's restructuring and asset sales.
• Customers and advertisers will be impacted by the company's programming and advertising strategies.
• Creditors will be impacted by the company's debt reduction efforts.

Next Steps

• The company will continue to focus on debt reduction.
• The company will continue to progress with the divestiture of the Bounce TV network.
• The company will continue to manage expenses prudently.
• The company will hold a conference call to discuss the quarterly results on August 9, 2024.

Key Dates

Keywords

political advertising, local media, Scripps Networks, WNBA, debt reduction, revenue, broadcasting, sports, advertising, television