E.W. Scripps Company (The)

Ladies and gentlemen, thank you for standing by. Welcome to the Scripps fourth quarter 2021 earnings call. At this time, all participant lines are in a listen only mode. Later, there will be an opportunity for your questions. If you would like to ask a question, you may depress one then zero on your telephone keypad. You will hear acknowledgement that your line has been placed in queue and you may remove yourself with the same prompts by pressing one then zero again. As a reminder, today's conference is being recorded. I would now like to turn the conference over to Carolyn Michelli, head of IR for Scripps.

Please go ahead. Thank you, Leah. 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 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 this call is Controller Dan Persky. And now here's Adam.

Good morning, everybody, and thanks for joining us as we report results for what was a terrific year for our company. We're so pleased to be delivering to you free cash flow that is 25% higher than the mid-range of our projection a year ago and 8% higher than we expected even in November. In 2019, our free cash flow was $65 million. We ended 2021 with $280 million of free cash flow, quite a change for us in a non-election year, a testament to the work we are doing to transform the company and to our continued focus on execution. Both of our divisions contributed to our outstanding 2021 financial performance. In local media, our sales teams capitalized on the rebound in the advertising marketplace and generated a record level of new business for us. They helped our advertisers reach targeted consumers on air, through our connected TV products, and across digital platforms. 2021 reaffirmed the important role local television advertising plays in the marketplace. Our Scripps Networks team came together to build a powerful and profitable economic engine that outpaced our financial expectations for its first year. The Networks Division fully realized its year one synergies for the ION acquisition, invested to launch three networks over the air, and began an aggressive plan for connected TV distribution, all while beating our initial acquisition thesis. As we look ahead to our results this year, our Scripps Network's expectations and our political revenue forecast point to free cash flow of between $400 and $450 million. Jason will talk more in a moment about our Q1 and full-year guidance. While so many other players in the television ecosystem are focused on the streaming wars, spending tens of billions of dollars in a battle for a finite share of the consumer's wallet, when you think of the EW Scripts Company, I want you to think of the power of free ad-supported television. During 2022, expect to see scripts continue to focus on further expansion into the fast-growing connected TV marketplace. across all of our local and national brands. And then there's over the air. It's not as sexy as digital, but OTA is growing right alongside connected TV. It's a regulated distribution platform with barriers to entry where we are already fully scaled and have a distinct leadership advantage. So it stands to reason we're going to accelerate its growth. More about how we'll do that in a moment. Recent studies show that cord cutters and cord nevers are spending an average of $142 a month between high-speed Internet access and up to 11 subscriptions, a higher price tag now than pay TV. In a recent Deloitte survey, 40% of respondents said they'd be canceling at least one service. And with no real customer captivity, it's no wonder Wall Street is so focused on subscriber retention rates and churn. We are, after all, in the middle of record inflation pressuring the consumer's pocketbook. Even those who aren't price sensitive report being overwhelmed by the content glut. Research firm Horowitz found 49% of streamers say they find it hard to know what shows are where, and 44% say they often have a hard time finding something to watch at all. There's just so much new premium content. In fact, tens and tens of billions of dollars worth of it. And yet, according to Nielsen, the most popular shows on streaming services are actually the network shows, still available for free over the air. We know live sports is the single most important driver of linear viewing. But if you streamed the Super Bowl, you were watching up to 60 seconds delayed. And it's no fun to get a tweet about a touchdown before you see it, let alone if you participate in in-game sports betting. This past season, the NFL's ratings came roaring back, reaffirming the value of live sports. Starting next year, broadband homes will have two choices to catch the action. They can sign up for several different subscription services and then try to keep track of where to watch which game when, or they can watch it all in the best quality, high-definition, in real time, over the air, and for free. It's against this backdrop of plus fatigue and content overload where we see opportunity to catalyze over-the-air's growth. Use of the over-the-air TV is expected to surpass 50 million households in the next three years. Already, more than 8 million digital antennas are sold in the U.S. every year. And one in four broadband homes is using free over-the-air TV bundled alongside its subscription services. But I should really say only one in four, because we will do better. Studies show that awareness and familiarity are the biggest obstacles to more consumers making OTA a part of their TV bundles. One common misperception is that they only get a small selection of stations. In fact, more than two dozen networks are available over the air, in addition to the Big Four, ION, local independent stations, and PBS. Over-the-air television is once again the best and easiest way for consumers to watch the most popular shows, live sports, and news for free. So it's time we let America know. Scripps is launching a consumer marketing campaign to help broadband homes better understand how to get free TV through digital antennas and how much great content is there for them once they do. We're also forming partnerships with key retailers, antenna manufacturers, rooftop installers, and TV hardware companies that will benefit from the growth of free over-the-air TV. Stay tuned over the coming months for more on this campaign and these powerful partnerships. In recent years, rather than waiting to see what happens in our industry, you've seen us take control of our own destiny. Several years of strategic divestitures, local station and national networks acquisitions, and operating performance improvements have positioned Scripps exceedingly well. We've carved out our own lucrative corner within the thriving television ecosystem, and so we'll continue to drive both excellent near-term operating performance and long-term value creation for the benefit of our employees and our shareholders. Now, here's Jason.