E.W. Scripps Company (The)

Good day, and thank you for standing by. Welcome to the third 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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 Muscelli, Head of Investor Relations. Please go ahead.

Thank you, DeeDee. 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 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. Reconciliations of these measures are included in our earnings release. 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 are pleased to be reporting a third consecutive quarter of results that met or exceeded expectations on nearly every reporting line fueled by our Scripps support strategy and strong sales execution, as well as tight expense controls. On the M&A front, We've been moving ahead with our plans for our station swaps with Gray and the sale of Fox Affiliate WFTX in Fort Myers, Florida. And last week, we announced the sale of WRTV in Indianapolis. We were very pleased with the valuations we received on the Fort Myers and Indianapolis stations. Those sale prices represent multiples well above current local broadcast station transactions, 9.2 times to your blended EBITDA for WFTX and 8.5 times for WRTV in Indy. and actually 9.2 times if you adjust for the impact of the Pacers finals run last June. These two cash sales will total $123 million, creating significant cash inflow that will improve the health of our balance sheet and provide for some modest de-levering. During the quarter, we closed on the placement of $750 million in new senior secured second lien notes. We locked in a very good rate of 9.78%. Proceeds were used to pay off our senior notes set to mature in 2027, to pay down more than $200 million of our 2028 term loan, and to pay off part of our revolving credit facilities. We have since paid off the remaining balance on the revolver a full quarter ahead of our guidance. We'll get back to debt reduction in a moment, but first let's review third quarter financial results and fourth quarter guidance. During the third quarter, our local media division revenue was down 27% due to the absence of political advertising revenue compared to the prior year. Core advertising revenue was up nearly 2%. We grew national advertising revenue, driven by an increase in our largest category, services. Our sports strategy helped drive that Q3 performance as well. Local media distribution revenue was flat. Expenses for the division were down more than 4% year over year, aided by lower employer-related costs. Local media segment profit was nearly $53 million, compared to $161 million in Q3 of last year's political cycle. For the fourth quarter, we expect local media division revenue to be down about 30%. We expect core revenue to be up about 10%, bolstered by our sports strategy, specifically our newest NHL partnership with the Tampa Bay Lightning, as well as the comparison to last year's political advertising displacement of core. We expect local media expenses to be flat to down low single digits, inclusive of the new sports rights expense for the Lightning. Now let's review the highlights for the Scripps Network's division third quarter results and fourth quarter guidance. In the third quarter, Scripps Network's revenue was $201 million, about flat compared to the year-ago quarter. Along with other companies in the national networks business, we dealt with economic uncertainty, and yet we look to have delivered significantly better results than others. Connected TV revenue was up 41% year-over-year. Just a reminder that our networks division CTV revenue comes from the extensive streaming distribution of our national networks. Advertising demand continues to be strong for our quality networks programming. In addition, inventory for both WNBA and National Women's Soccer League games commands premium advertising rates. The division's expenses for the quarter were down 7.5% due to lower employee-related costs and operational reductions we made last fall at Scripps News. Scripps Network's segment profit was $53 million, and the segment margin was 27%. For the fourth quarter, we expect Scripps Network's division revenue to be down in the low double-digit range. This is being driven by a number of factors. We have more than 10 million of Network's political revenue in last Q4. We have a lower percentage of upfront advertising compared to the year-ago quarter, and our usual Q4 Medicare open enrollment advertising is lower right now, partially due to the government shutdown. We expect Scripps Network's expenses to be down low double digits. Turning to the segment labeled Other, in the third quarter, we reported a loss of $7.6 million, about the same loss as Q3 2024. Shared services and corporate expenses were $21.4 million. For the fourth quarter, we expect that line to be about $21 million. For the third quarter, we reported a loss of $0.55 per share. The quarter included a $7.6 million loss in extinguishing the debt, $6.5 million of financing transaction costs, a $1.4 million write-off of deferred financing costs, and $2.7 million in restructuring costs. Those items increased the loss by a total of 15 cents per share. In addition, the preferred stock dividend has a negative impact on earnings per share, even when we don't pay it. This quarter, it reduced EPS by 18 cents. I have an update to a four-year guidance number that shows improvement over our previous guidance. We now expect our cash interest paid to be between $165 and $170 million. This reduces the projected cash we need for interest. Coupled with the improvements we announced last quarter to lower the cash we need for taxes and CapEx, this will drive significantly better cash flow this year than originally anticipated. Turning to our two financing transactions this year, we were able to refinance all of our 2026 and 2027 maturities and a portion of our 2028 debt, while limiting the increase in our cost of capital to only 1%, despite the current elevated rate environment. We expect to pay off the remaining reduced 2028 term loan balance through cash flow before it comes due, leaving us with no other bond or term loan financings to address until our 2029 senior notice. At September 30th, we had no borrowings outstanding on our revolving credit facility, and cash and cash equivalents totaled $55 million. Net leverage at the end of Q3 was 4.6 times, a significant improvement from six times in Q2 of last year. Our capital allocation priorities remain the same. We're focused on using cash flow to reduce the amount of our debt, and we place our highest priority on the reduction of our debt and the lowering of our leverage ratio. And now, here's Adam.