E.W. Scripps Company (The)

Ladies and gentlemen, thank you for standing by and welcome to the Scripps third quarter 2021 earnings release conference 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 for a question at any time by pressing 1, then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. As a reminder, today's call is being recorded. I'll turn the call now over to Ms. Carolyn Michele. Please go ahead.

Thank you, John. Good morning, everyone, and thank you for joining us for a discussion of the EW 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 include forward-looking statements and actual results may differ. Factors that may cause them to differ are outlined in our SEC filings. We do not intend to update any forward-looking statements we make today. Included on this call will be 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 financial 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 Knudson. Also on the call is Controller Dan Persky. Now here's Adam.

Good morning, everybody, and thanks for joining us as we report another quarter of outstanding results. Ten months into Scripps' transformation into a fully different kind of television company, Investors need to know we are operating from a playbook unlike anything else in the broadcast sector. In fact, we have become much more than a local broadcast company. Instead, we're a full-scale television company that will deliver outstanding near-term results, as evidenced by our financial performance, and also are well positioned to succeed in the evolving TV marketplace. While we operate a high-performing, results-driven, and fully-scaled local broadcast group, that's just part of the news script story. The other part, and what distinguishes us from our local broadcast peers, is our national networks business and our focus on aggressively serving the TV consumer of today and tomorrow. We're delivering them what they want to watch, however they want to watch it. As we move toward the end of the Scripps Network's first year, this division is accounting for about 40% of the company's revenue and closer to 70% of our segment profit. And the networks have helped us to once again increase our 2021 free cash flow guidance. We entered the year expecting $210 to $240 million. but now we expect to close it out between $255 and $265 million. This is free cash flow that will be quadruple our last non-election year free cash flow performance of $64 million. The Scripps transformation into a fully scaled television company has made us more productive and far more durable. Our new asset mix is delivering outstanding results and positions us to capitalize on the future of television. And of course, our new free cash flow profile gives us an even faster path to paying down debt than we had as a smaller scale television company. In light of the changes we've undergone this year, I'm encouraging media investors to evaluate Scripps as much more than a local broadcaster. We now have access not just to local and select national advertising, but also to national advertising from the general market, upfront and scatter, as well as the burgeoning direct response marketplace. Now, we absolutely expect to benefit from the continued growth of retransmission revenue on the back of significant repricing opportunities ahead for us. And while retrans will account for about half of our local media revenue this year, similar to that of other broadcasters, it will be less than 30% of our total company revenue. because we have expanded into new marketplaces where we have significant opportunity for share growth. Ever since we began remaking this company several years ago, our guiding principle has been to identify consumer media habits early and get ahead of the trends to create value. We will continue to profit from the important role our local brands play in the pay TV ecosystem, but consumers have many more viewing options now. And those new TV marketplaces also have opened up significant value creation opportunity for Scripps investors. You already know we're the leader in free over-the-air television. This is a compelling marketplace that has grown to about 40% of U.S. TV households. And at any one time, almost 30% of over-the-air viewing nationwide is happening on a Scripps-owned network or local channel. Our leadership in over the air is a cornerstone of our strategy and consistent with our consumer focus, we are also growing our scale through our local and national media brands in the connected television marketplace. Today, all of our local media brands are available through the major CTV platforms and creating meaningful new revenue from them. In fact, Connected TV revenue helped local media this quarter deliver industry-leading core revenue results. On the network side, Newsy and Court TV already have nearly full CTV distribution. Bounce and ION are now moving into the CTV space, and over the next six months, we're methodically adding most of our other national networks onto key platforms as well. These moves open up revenue opportunity in the important fast-growing connected television marketplace with immaterial additional expense and thus attractive margins. Scripps is playing today in all of the TV marketplaces. Our programming distribution platforms are diverse and relevant. Our revenue streams are also diverse and growing. Our profitability stems from efficient cost structures and operating leverage that provides a scalable platform for growth. So while we have much in common with our local broadcast peers and we love our local television business, we hope investors can appreciate the differentiated value creation Scripps is executing today. Those of you who know me well know I love my analogies. Well, to stretch a popular analogy a little further, At Scripps, we're changing the tires on the race car as it goes around the track. We've upgraded the engine, and all the while, our quarterly results show that we've also been able to slam our foot down on the pedal to increase the speed. Now here's Jason.