E.W. Scripps Company (The)

Ladies and gentlemen, thank you for standing by, and welcome to the Scripps Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question and answer session. If you have a question during that time, you may queue up by pressing 1 and then 0 on your touchtone phones. Once again, you may queue up by pressing 1 and then 0 on your touchtone phones. If you need assistance on the call, you may press star and 0, and someone will assist you offline. And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to Carolyn Michelli. Please go ahead.

Thank you, Cynthia. Good morning, everyone, and thank you for joining us for a discussion of the E.W. Scripps Company's financial results. You can visit Scripps.com for more information and a link to the replay of this call. A reminder that our conference call and webcast include forward-looking statements and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. The COVID-19 pandemic enhances the uncertainty of forward-looking statements we make about our operations and financial conditions. We do not intend to update any forward-looking statements we make today. If you have not yet signed up for Scripps Virtual Investor Day next Wednesday, you can email us at ir.scripps.com to register. We'll hear this morning from Scripps President and CEO Adam Simpson, our new Chief Financial Officer Jason Combs, the president of our new Scripps Networks division, Lisa Knutson, and our longtime local media president, Brian Lawler. Also on the call is controller Dan Persky, who was recently promoted from assistant controller and has been with Scripps for 13 years. Our former controller and treasurer, Doug Lyons, is now overseeing financial strategy and special projects. Now here's Adam.

Good morning, everybody, and thanks for joining us. Today, we present you with an EW Scripps company that has significantly evolved over the last few months. We are exiting the digital audio business to fantastic returns, and we have acquired ION and combined it with Newsy and the Capes Networks to assemble a powerful new national broadcast networks business. Today, Scripps is a full-scale television company and the largest holder of broadcast spectrum in the United States. Our local station group reaches one in four US TV households across the nation to deliver local news and programming over the air on pay TV and on Internet based platforms. Our new national networks business scripts networks reaches nearly every American through free broadcast TV on pay TV and across a range of emerging TV platforms. As a company, we provide our advertising customers with unparalleled audience reach that is both broad nationally and deep locally. More about why I say unparalleled audience reach in a moment. By now, I think our track record supports me when I tell you we are dedicated as much to our near-term operating performance as to our longer-term value creation. The strategic moves we have made over the last few years will... No, they already are paying off for our shareholders. The transformation of our company is about so much more than next quarter's performance, because we will be exceptionally positioned for the future of television. As we often tell you, Scripps has always been about anticipating and capitalizing on the evolving habits of media consumers. And today, we're poised to do it again, profiting from the disruption in television. Practically every month, a new DTC subscription service launches, and they are all battling each other out for a finite share of the American consumer's wallet. At this point, many Americans are paying as much for broadband and multiple subscription services as they were when they complained about their pay TV bills. And it is in this SVOD melee that investors will come to see the power of the Scripps opportunity. significant leadership in free television because television consumers whether they subscribe to cable or not are picking and choosing for themselves and more and more often they're combining subscription streaming services with free TV delivered over the air as we all should recognize by now television consumers have taken control of their own bundles and The future isn't a question of pay TV or streaming TV or over the air. The future of television is a combination of all three. Our local and national television brands reach consumers in all of these places with the quality entertainment and fact-based news programming they're seeking. And of course, that means we're also delivering the eyeballs that advertisers are looking for. While time spent watching cable for the key demos is way down, The advertising impressions for free television are way up, and we expect that growth to continue as the marketplace develops. We bought a great business in ION, and combining it with Kate's and Newsy gives all seven networks new growth levers, both immediately and over the longer term, as we harness the scale of our networks together to grow audience and national advertising share. To quantify the immediate growth, I can tell you we have significantly raised our expectations for free cash flow per share accretion. We now believe we will exceed our previously provided 2020-2021 free cash flow per share accretion estimate of more than 60%. Instead, we now expect this transaction to yield free cash flow per share accretion of about 75%. Our new Scripps Networks president, Lisa Knutson, will talk more about the network's growth levers in a moment. While we are already creating value in 2021 and focused on our growth opportunities beyond, I have to take a few minutes to recognize our 2020 financial performance, which exceeded even the expectations we laid out to you in November. Scripps ended the year by delivering free cash flow that was about 30% higher than the estimates we put out for 2020 before the pandemic began. We rescinded that guidance last March when COVID hit the country, so I think you'll agree our performance was remarkable given the economy last year. Exceeding revenue expectations across the board translated to higher profitability and cash flow. much higher even than the $280 million estimate I gave you on November 6th, when we had already accounted for our full political year. I'm very pleased to share that we ended the year having generated $310 million in free cash flow. This performance will translate to about 17% of every net revenue dollar dropping to the free cash flow bottom line. On an as-reported basis, that compares to 9% in 2018, a comparable political year, and before we acquired the Cordillera and Tribune Nexstar divestiture stations. We were able to deliver higher free cash flow than anticipated, even after accounting for the heavy political spending, because of the additional strong revenue and profitability of the national businesses, better than expected local core advertising, and prudent expense management across the company. You'll hear much more from us next Wednesday morning at our investor presentation about our near-term strategies and the value we are already creating from our national networks business. The success and perpetuation of this company would not have been possible without the long-time, steady stewardship of Rich Boehne, who announced last week he would not run for re-election to our board. Rich has played an integral role in the milestones of our company since we went public in 1988. He partnered with former Scripps Networks Interactive CEO Ken Lowe to develop the idea of putting home renovation on television with HGTV. And from there, Lifestyle Networks became an entertainment phenomenon that has created tremendous value, including for many of you. Rich led this company through the sale of its newspapers, the expansion of its local broadcast holdings, the acquisition of Cates, and the entry into digital audio, among many other transactions. Rich is my mentor and my close friend, and I'm privileged to have learned from his wise counsel and his entrepreneurial spirit. Finally, I'd like to welcome Jason Combs to his new role as Chief Financial Officer. Most of you know Jason because he has been a close partner to Lisa as Head of Financial Planning and Analysis for Scripps. I am confident Jason will take forward Scripps' conservative balance sheet approach As we looked to pay down debt, we assumed to fund the company's recent transformation. Now, here's Jason to discuss our strong 2020 results.