E.W. Scripps Company (The)

Ladies and gentlemen, thank you for standing by and welcome to the Scripps first quarter 2021 earnings call. At this point, all the participant lines are in a listen-only mode. However, there will be an opportunity for your questions. You may queue up at any time by pressing 1, then 0 on your telephone keypad. As a reminder, today's call is being recorded. I'll turn the call now over to Ms. Carolyn Michele, Head of Investor Relations. Please go ahead.

Thank you, John. Good morning, everyone, and thank you for joining us for a discussion of the E.W. Scripps Company's financial results and business strategies. 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 includes 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. Included on this call is a discussion of certain non-GAAP financial measures that are provided as supplements to assist management and the public in their analysis and valuation of the company. These metrics are not formulated in accordance with GAAP and are not meant to replace GAAP financial measures and may differ from other companies' uses or formulations. Included in our earnings release are the reconciliations of non-GAAP financial measures to the GAAP measures reported in our financial statements. We'll hear this morning from Scripps President and CEO Adam Simpson, Chief Financial Officer Jason Combs, Local Media President Brian Lawler, and Scripps Networks President Lisa Knutson. Also on the call is Controller Dan Persky. Now here's Adam.

Thanks Carolyn. Good morning everybody and thank you for joining us. We're very pleased today to be presenting first quarter results that met or exceeded expectations by every measure. One year after the COVID-19 pandemic began to ravage the world's economies and the U.S. advertising market, we are clearly on the rebound and moving into second quarter with significant and sustained momentum. During this call last year, we suspended our financial guidance due to the great uncertainty about what the global pandemic would bring. But we also promised that we would do our best to use that uncertainty and the pandemic's chaos to our advantage to play offense. and to continue our quest to remake this company. Today, we are reinstating our guidance out of confidence that the recovery is here, and we are doing so as a very different EW Scripts company, stronger, more durable, even more focused, and very well positioned for the future of television. Since Election Day, we have benefited from a resurgence in the local and national television advertising marketplaces. Businesses have reopened, mask mandates are loosening, and vaccine rates are rising. Americans are coming out of their homes, their wallets a little fatter with federal stimulus dollars, and advertisers are competing to capture them. Scripps is ready. Over a year when the nation was hunkered down, Scripps was positioning ourselves to lead and thrive. In local media, we focused on core ad sales execution, the development of new to TV ad dollars, the political spending climate, and our retransmission revenue opportunity. The results we are reporting today illustrate our success in the execution of our plan and in capturing the benefits of our portfolio's scale and reach, a benefit we expect to continue to pay off handsomely for Scripps in the form of retrans step-ups for years to come. On the national front, We completed acquisitions and divestitures that were designed to maximize shareholder value and set up even greater profitability. We capitalized on our podcasting and digital audio investments with high return sales of Stitcher and Triton. We acquired the ION network, significantly improving our cash flow profile, and we combined ION with our five fast-growing CAPES networks and Newsy to to create a new powerhouse portfolio of national television networks, the Scripps Networks. What we are today is a fully scaled television company that reaches audiences broadly across the United States and deeply in the nation's best local regions. Scripps' media businesses reach nearly every American through cable and satellite, over the top platforms, and free TV over the air. Let's talk for a moment about why free TV is so important. Free over-the-air television solves a few big problems in the TV ecosystem, both for audiences and for advertisers. There's growing evidence that consumers are beginning to feel the pressure from the fragmentation of the streaming services. A recent analysis by Bloomberg News found that putting together the most popular streaming services now costs about $92 a month. about the same as an average cable package of $93 a month. And that's before factoring in that a household still has to pay for internet. A recent Deloitte survey found that the average American subscribes to 12 paid media and entertainment services. Millennials average 17 paid subscriptions. And not surprisingly, the survey finds they're overwhelmed by managing all of those services. and buy all of their entertainment options, what to binge watch next, where to watch it, how to keep up with all of those monthly fees. In contrast to streaming, an over-the-air digital antenna these days is cheap, a one-time purchase, and from there, free to use. The Scripps networks are providing popular crime and justice dramas and documentaries, classic movies, hit syndicated sitcoms and dramas, and objective national journalism and compelling courtroom coverage. And our local stations carry news and the Big Four's live sports and programming all over the air. While the subscription services themselves are investing in high-priced originals to attract new subs, the fact remains that the top stream shows are the same premium off-network programs that consumers lean back and watch for free on our networks. Easy to find. easy to watch, easy to enjoy. For advertisers, our delivery of this desirable audience solves the problem of viewers disappearing into streaming services that don't take advertising. The OTA audiences continued to get bigger too. According to Nielsen, over the year viewing grew 10% from 2019 to 2020. Horowitz Research forecast 65 million households will be watching OTA in 2025. either by itself or coupled with a streaming cable or satellite service. As the leader in over-the-air network television and one of the nation's largest and strongest portfolios of local stations, we will benefit from this growth. Growth that we think we can even accelerate to our advantage because a significant percentage of streamers aren't yet using a digital antenna. We're talking about a segment of the 40 million Americans who don't subscribe to cable or satellite. We see this group of cord nevers and cord cutters as a big opportunity. Reaching them and bringing them into the OTA marketplace is our first priority. This over-the-air marketplace serves as the underpinning of our company's growth strategy. It's not a bet on the future. It's a play to consumer behavior today. With excellent execution in local media and marketplace leadership at Scripps Networks, Scripps is creating new shareholder value. In fact, we project the recent strategic moves of this company to result this year in $210 to $240 million of free cash flow, a level we would have only reached in the past during a big election year. That's meaningful transformation of our cash flow profile, and we're immediately putting that higher cash flow to work as we begin to pay down debt. This month, we'll redeem $400 million in bonds, a first step on the path towards Scripps' customary levels of leverage, and continuing our track record of delivering on our promises. Now, here's Jason.