E.W. Scripps Company (The)

Good day and thank you for standing by. Welcome to the first quarter 2026 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 first speaker today, Becca McCarter, Senior Director, External Communications. Please go ahead.

Thank you, DeeDee, and 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 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 coming into this morning's call with strong momentum and good news about our financial performance and other activity. Here are a few of the highlights. We are progressing rapidly on executing our comprehensive transformation strategy, which has helped drive significant improvement in our first quarter net leverage to under four times. Our local media division delivered a strong performance with industry-leading 7% core advertising revenue growth, driven by our unique live sports strategy. We launched the Script Sports Network, a premium free streaming channel. We are entering a midterm election cycle with strategic market exposure in key battleground states, And we continue to optimize our portfolio through strategic asset transactions, generating $123 million in gross proceeds from recent sales of two stations. We also continue to work towards the closing of our station swaps with Gray and pursue additional M&A activity to support debt reduction and enhance operating performance. In addition to those recent highlights, we are pleased to have just successfully completed a new affiliation agreement with our largest network partner, ABC, covering 17 ABC affiliates. With that overview as a backdrop, I'd like to review our first quarter financial results and then I'll discuss second quarter guidance, followed by details on our improving debt position. I'll conclude with a review of our EBITDA improvement plan. I will present our first quarter local media division results on a same station or adjusted combined basis, removing the Q1 2025 results of the two TV stations that we've now sold and reflecting our addition of the Lexington ABC affiliate. During the first quarter, Our local media division revenue was $331 million, up 5.8% from first quarter 2025. Core advertising increased 7%. Our services, automotive, and gambling categories all grew in the quarter. Local core advertising year-over-year growth was largely driven by advertising sales tied to our National Hockey League telecast. We saw a strong contribution from the addition of our newest rights agreement with the Tampa Bay Lightning, And beyond this new partnership, we also saw strong growth in our existing NHL deals with the Vegas Golden Knights, the Utah Mammoths, and Florida Panthers. Our strategy is designed to drive year-over-year growth across both our existing deals and new partnerships. And last month, we announced a fifth full-season NHL sports rights agreement with the Nashville Predators to start this fall. The Winter Olympics and the Super Bowl also contributed to our Q1 core advertising growth. Political advertising revenue was nearly $9 million as we begin what's expected to be a record-breaking spending cycle for the midterm elections. This year, we forecast strong spending in our markets due to U.S. Senate and gubernatorial races in Arizona, Colorado, Michigan, Nevada, Ohio, and Wisconsin. We also are watching growing competitive situations in Florida and in Montana. Local media distribution revenue increased 2% again on a same-station basis. Expenses for the division increased about 2.4% year-over-year. Excluding the impact of our expenses tied to our new NHL team deal, expenses were flat. Local media segment profit was $44 million compared to $32 million in Q1 2025. For the second quarter, we expect local media division revenue to be up low single digits. We expect core advertising to be down low single digits without the benefit of live sports for most of the quarter. We expect Q2 local media gross distribution revenue to be impacted by our impasse with Comcast, which ran from March 31st to May 5th. Based on that timing, we still expect full year gross distribution revenue to grow in the low single digit range, but now expect net distribution revenue to grow in the low double digit range, a slight change from our previous guidance. We expect second quarter local media expenses to be flat to Q2 of 2025. Now let's review the Scripps Networks Division first quarter results and second quarter guidance. Once again, I'll be presenting the results on an adjusted combined basis, in this case, adjusting for the impact of the core TV sale. In the first quarter, Scripps Networks revenue was $174 million, down 9.5% from Q1 2025. Connected TV revenue was up 26% from the same quarter last year. The division's expenses for the quarter were $126 million, up 1%. Scripps Network's segment profit was $47.5 million, compared to $66.8 million in the year-ago quarter. For the second quarter, we expect Scripps Network's division revenue to be down about 10%. The networks are facing a softer market from macroeconomic conditions impacting the direct response marketplace and external measurement pressure from recent Nielsen methodology changes. Adam will talk more about this in a moment. We expect Scripps Network's Q2 expenses to be up in the low single digits. Turning to the segment labeled Other, in the first quarter, we reported a loss of $6 million. Shared services and corporate expenses were $26.6 million. For the second quarter, we again expect that line to be about $27 million. Higher medical claims and increased insurance premiums are causing that line to go higher than usual. For the first quarter, the company is reporting a loss of 20 cents per share. The loss included a $30 million gain on the sales of Cork TV and two television stations, WFTX in Fort Myers, Florida, and WRTV in Indianapolis. These sale transactions decreased the loss attributable to shareholders by 25 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. We had $20 million outstanding on our revolving credit facility at the end of the quarter. On April 30th, we entered into an agreement to extend the July 7th, 2027 maturity date of our revolving credit facility to July 7th, 2029 with commitments of $200 million. For the first quarter, cash and cash equivalents totaled $84 million. Net debt was $2.2 billion as defined in our credit agreement. Also during the quarter, we paid down $10.2 million on our B-2 term loan, In addition, we paid down $20.4 million on our B-3 term loan. Since the end of the quarter, we've paid down an additional $30 million on the B-2 term loan for a total of just over $60 million in term loan paydown since the beginning of this year. Net leverage at the end of the quarter was 3.9 times per the calculations in our credit agreement, which includes certain pro forma adjustments relating to our transformation efforts. As we announced in February, our company transformation plan includes growing enterprise EBITDA by $125 to $150 million. Our EBITDA improvement plan balances right-sizing our current expense structure with implementing new ways to grow revenue and profitability. You'll start to see the financial benefits of our plan in the second half of this year. We expect total in-year EBITDA impact of $20 to $30 million and an annualized run rate of about $75 million as we move into next year.