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01/10 16:23
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed sentiments: while CTV growth and margin expansion are positive, revenue declines in key divisions and political ad revenue uncertainty are concerning. The Q&A highlights management's optimism about future growth and margin expansion but also notes challenges in the ad environment and economic uncertainties. Given these mixed signals, the overall sentiment is neutral, suggesting limited stock price movement in the short term.
Local Media division revenue Down 27% year-over-year due to the absence of political advertising revenue compared to the prior year. Core advertising revenue was up nearly 2%, driven by an increase in the largest category, services, and supported by the sports strategy.
Local Media distribution revenue Flat year-over-year.
Local Media division expenses Down more than 4% year-over-year, aided by lower employee-related costs.
Local Media segment profit Nearly $53 million compared to $161 million in Q3 of last year's political cycle, reflecting the absence of political advertising revenue.
Scripps Networks revenue $201 million, about flat compared to the year-ago quarter. Connected TV revenue was up 41% year-over-year, driven by extensive streaming distribution of national networks and strong advertising demand for quality networks programming.
Scripps Networks division expenses Down 7.5% year-over-year due to lower employee-related costs and operational reductions made last fall at Scripps News.
Scripps Networks segment profit $53 million with a segment margin of 27%.
Other segment loss $7.6 million, about the same as Q3 2024.
Shared services and corporate expenses $21.4 million.
Loss per share $0.55 per share, including a $7.6 million loss on extinguishment of 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, which increased the loss by $0.15 per share. Additionally, the preferred stock dividend reduced EPS by $0.18.
Net leverage 4.6x at the end of Q3, a significant improvement from 6x in Q2 of last year.
Scripps Sports Strategy: The company has expanded partnerships with WNBA, National Women's Soccer League, NHL teams, and other sports leagues. Revenue from WNBA on ION nearly doubled this season, and sports partnerships are driving core advertising revenue growth.
Connected TV Revenue: Revenue from Connected TV increased by 41% year-over-year, with a projected 2025 revenue of over $120 million. Streaming now constitutes 20% of Scripps Networks viewing.
Station Swaps and Sales: The company executed station swaps with Gray and sold stations in Fort Myers and Indianapolis for $123 million. These transactions improve market positioning and provide cash inflow for debt reduction.
Expense Management: Expenses in the Local Media division were down more than 4% year-over-year, and Scripps Networks expenses decreased by 7.5%. Fiscal discipline and efficiency initiatives are improving margins.
AI and Automation: The company is leveraging AI and automation in newsrooms and sales teams to improve efficiency and economics, with early results showing value.
Debt Refinancing and Reduction: The company refinanced 2026 and 2027 maturities, reduced 2028 term loan balance, and achieved a net leverage improvement from 6x to 4.6x year-over-year.
Portfolio Optimization: The company is optimizing its portfolio through station swaps and sales, focusing on enhancing performance and economic durability.
Local Media Revenue Decline: The Local Media division revenue was down 27% in Q3 due to the absence of political advertising revenue compared to the prior year. For Q4, revenue is expected to decline by about 30%, which could impact financial performance.
Economic Uncertainty: Economic uncertainty has affected the National Networks business, potentially impacting advertising demand and revenue stability.
Debt Levels and Refinancing: The company has refinanced debt and reduced leverage, but it still carries significant debt, with net leverage at 4.6x. High debt levels could pose risks in a rising interest rate environment.
Decline in Political Advertising Revenue: The absence of political advertising revenue in Q3 and lower Medicare open enrollment advertising in Q4 due to the government shutdown are negatively impacting revenue.
Dependence on Sports Strategy: The company’s growth is heavily reliant on its sports strategy, which includes partnerships with sports leagues. Over-reliance on this strategy could pose risks if these partnerships fail to deliver expected returns.
Streaming Revenue Growth Challenges: While Connected TV revenue has grown, the company faces challenges in maintaining double-digit growth in a competitive streaming market.
Operational Risks from AI and Automation: The company is leveraging AI and automation in newsrooms and sales, but these initiatives carry risks related to implementation, cost, and potential disruptions.
M&A Execution Risks: The company is engaged in station swaps and sales to optimize its portfolio. However, these transactions carry execution risks and may not yield the expected financial benefits.
Local Media division revenue: 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.
Local Media expenses: We expect Local Media expenses to be flat-to-down low single digits, inclusive of the new sports rights expense for the Lightning.
Scripps Networks division revenue: For the fourth quarter, we expect Scripps Networks division revenue to be down in the low-double-digit range. This is being driven by a number of factors, including more than $10 million of networks political revenue in last Q4, a lower percentage of upfront advertising compared to the year ago quarter, and lower Medicare open enrollment advertising due to the government shutdown.
Scripps Networks expenses: We expect Scripps Networks expenses to be down low double digits.
Cash interest paid (full year guidance): We now expect our cash interest paid to be between $165 million and $170 million, reducing the projected cash needed for interest.
Debt reduction: 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 notes.
Connected TV revenue: Streaming now constitutes 20% of all Scripps Networks viewing, and we continue to increase our offerings with more streaming content. We have plenty of room for ongoing double-digit growth in Connected TV revenue.
Expense management and transformation: On the Scripps Network side, we expect to deliver a 400 to 600 basis point year-over-year margin improvement through efficiency initiatives and a leaner expense base. Fiscal discipline is a key part of the financial improvement plan, and you can expect it to continue as we balance expense management with strategic growth investments.
Midterm election advertising: The midterm election looks to yield record spending across the advertising ecosystem.
The selected topic was not discussed during the call.
The earnings call reveals mixed sentiments: while CTV growth and margin expansion are positive, revenue declines in key divisions and political ad revenue uncertainty are concerning. The Q&A highlights management's optimism about future growth and margin expansion but also notes challenges in the ad environment and economic uncertainties. Given these mixed signals, the overall sentiment is neutral, suggesting limited stock price movement in the short term.
The earnings call reveals mixed signals: strong margin improvements and strategic sports partnerships are positive, but EPS loss and cautious advertising outlook are concerns. The Q&A session highlighted uncertainties in the advertising environment and lack of clear strategies for AI impact. While debt reduction efforts are commendable, the overall sentiment remains cautious due to financial losses and macroeconomic uncertainties, leading to a neutral stock price prediction.
The earnings call presented mixed signals. While there were improvements in segment profit and cost control, revenue declines and a loss in EPS were noted. The Q&A session revealed uncertainties in future performance and lack of specific guidance, but optimism in Connected TV growth and potential regulatory benefits. Overall, the strong political advertising revenue and refinancing efforts offer some positive aspects, but the lack of clear guidance and revenue declines balance the sentiment to a neutral outlook.
The earnings call presents a mixed outlook. Strong political advertising revenue and debt reduction are positives, but declining core advertising revenue and unclear 2025 guidance are concerns. The Q&A reveals uncertainties in advertising performance and management's evasive responses on negotiations. The overall sentiment is neutral, as positives are offset by negatives, and the lack of specific guidance adds uncertainty.
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