E.W. Scripps Company (The)

Good day and thank you for standing by. Welcome to the first quarter 2025 EW Scripps Company earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Carolyn Michelli, Head of Investor Relations. Please go ahead.

Thanks, Edie. 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 based on management's current outlook. and actual results may differ materially. 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 evaluation 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 Chief Financial Officer Jason Combs and then Scripps President and CEO Adam Simpson. Here's Jason.

Good morning, everyone, and thank you for joining us. We're reporting first quarter results today that outperform financial expectations despite the headwinds of uncertainty in the U.S. economy about tariffs, inflation, and recession. In fact, we've had a very good start to the year. We have successfully completed retransmission negotiations covering 25% of our legacy pay TV households. We continue to reduce expenses. We exceeded our expectations on Scripps Network's margin improvement, delivering 870 basis points of improvement for the quarter, well ahead of the 400 to 600 basis points we had promised for this year. And we closed on our previously announced refinancing transactions. Every one of these moves in service to our commitment to improving operating performance and our balance sheet. Let's start this morning with financial highlights for our local media and Scripps Network divisions from the first quarter. Then I will give some Q2 guidance and discuss our refinancing details and upcoming priorities. In the first quarter, local media division revenue was down 7.8% from the year-ago period. Core advertising revenue was down 3% as we experienced hesitancy in advertising spending due to economic uncertainty. Local distribution revenue was down 5% year-over-year Our contract renewals for 2025 took effect at the end of the first quarter, and we'll see their benefits starting in Q2. Local media expenses increased only 1% from the prior year quarter, which is on the better end of our guidance of up low single digits due to lower than expected employee costs. Local media segment profit was $35 million, compared to 66 million in Q1 of 2024, an election year. For the second quarter, we expect local media division revenue to be down in the high single digit range with core revenue down in the low single-digit range stemming from the continued uncertainty related to tariffs. We expect Q2 local media expenses to be up in the low single-digit percent range. Now I'd like to review the Scripps Networks Division first quarter results and guidance for the second quarter of 2025. In the first quarter, Scripps Networks revenue was $198 million, down about 5% from the year-ago quarter. Connected TV revenue was up a very strong 42% in the quarter, We credit this growth to effective sales strategies and execution for our national networks, which are established on the major streaming services. ION is the largest contributor to our CTV revenue, and we've been pleased to see strong advertiser support on CTV for the National Women's Soccer League since it started its new season in mid-March. We expect the NWSL and the WNBA to help drive revenue performance for the division in the second and third quarters. Another good Q1 results story for the Scripps Networks division is the 16% decrease in expenses. This significant decline came from tight cost controls and the reductions in Scripps News operations we announced in November. Disciplined expense management combined with effective advertising sales execution led to our highest margins in the division since the fourth quarter of 2022 at 32%. Network segment profit was $64 million, compared to 49.7 million in the year-ago quarter. For the second quarter, we expect Scripps Network's division revenue to be about flat and for the network's expenses to be down in the low double-digit range due to the aggressive expense management across a variety of functions in the segment. Turning to the segment labeled Other, in the first quarter, we reported a loss of $6.4 million, the same as the year-ago period. Shared services and corporate expenses were $22.6 million. For the second quarter, we expect that line to be about $22 million. Our EPS for the quarter was a 22 cent loss. That compares very favorably to the consensus EPS estimate, even with the impact of the preferred stock dividend, which has a negative impact on earnings per share, even when we don't pay it. This quarter, it reduced EPS by 18 cents. First quarter results also included a $4 million restructuring charge that increased the loss to shareholders by $0.04 per share. Regarding our real estate asset sales, from late last year to today, we have completed transactions totaling $63 million. That includes the sale of five transmission towers and our West Palm Beach station building. At March 31st, cash and cash equivalents totaled $24 million, and our total debt at quarter end was $2.6 billion. Net leverage at the end of Q1 was 4.9 times, and we expect to continue to reduce our leverage ratio this year. On April 10th, we completed our refinancing transactions. No amounts remain outstanding on our term loans that had been due in 2026 and 2028 and for our old revolving credit facility. You can find the details on our new term loans due in 2028 and 2029 in yesterday's earnings press release, as well as the details of our new revolving credit and AR securitization facilities. Just a reminder that, despite the current elevated rate environment, these transactions only increased our blended cost of debt by less than 1%. And we have now retired or extended the maturity of up to $1.5 billion of debt. We believe the completed refinancing transactions have positioned us well for the near term with a clear runway through mid-2027. We remain focused on using free cash flow to reduce the amount of our debt, with debt and leverage reduction as our highest capital allocation priority. Furthermore, we continue to evaluate our remaining debt maturities as part of our efforts to further optimize the balance sheet. Here's Adam.