The E.W. Scripps Company - CFO Jason Combs, Chief of Communications & IR Carolyn Micheli

The EW Scripps Company located in Cincinnati, Ohio is a diversified media enterprise and one of the largest independent owners of local television stations in the United States. The company's local media segment operates 61 TV stations across the country, reaching over 36% of US TV households. The Scripps Networks division is comprised of eight national news and entertainment networks that reach nearly every US household over the air and are also widely distributed on both pay TV and connected TV. The company has about 88 million shares trading around $220 for a $200 million equity market cap, $2.6 billion of net debt, $600 million of preferred equity for about a $3.4 billion total enterprise value. We have Scripps' CFO Jason Combs and Chief Communications and Investor Relations Officer Caroline McKelie here with us today. Thank you guys so much for joining us. Scripps has gone through a pretty significant transformation and reorganization over the last several years. Talk us through how Scripps' strategy has evolved and what the company's most focused on today.

Great. Thanks. That's really helpful. And then I want to jump into the regulatory outlook, but just starting to kind of set the stage. Can you talk about Scripps' capital allocation priorities from where we sit today and where you want to be from a leverage perspective? And then from there, we'll move on to the regulatory side of things.

Thanks. That's helpful. And so you're our first session of the day, but I anticipate like I mentioned during the opening remarks that we'll be talking a lot about the regulatory environment and there's a lot of optimism right now on the broadcast side for deregulation which could potentially spur consolidation and really be impactful for the local broadcast group. What's your perspective on Chairman Carr's policy direction so far? When do you think that we'll start to see real progress on relaxing the ownership cap and modernizing other broadcast rules?

And then I believe there was a Democratic commissioner who also announced he'd be leaving shortly as well. So, I believe that would leave us at kind of a 1-1 situation. What do you think that means for some of these rules getting changed and what would the timeline look like?

So, I think that the next Republican seat will be filled fairly quickly and that will give them a quorum and a Republican majority, and I think they'll move quickly in the other seats as well. But if you have anything else to add...

Well, just how aggressive Carr has been in his commentary. I mean, he even climbed a broadcast transmission tower to make a point about his support for local broadcasters. None of us have done that. So, I think it's been very aggressive commentary and we expect things to happen quickly and he'll replace Simington and get Olivia Trusty in there quickly.

Okay, great. So in terms of consolidation and scale is very important in this business. What do you think some of these changes might mean for the broadcast industry? And I guess in terms of M&A, what would be the most compelling M&A opportunities for Scripps? How do you kind of envision your role in further industry consolidation? And then we'll go forward from there.

What kind of benefits do you see in terms of swaps and those sort of deals for improving Scripps' operating performance? I mean, how big are the synergies and what?

That makes sense. And then there's been some other potential areas for regulatory relief that have been floated, for example a cap on reverse comp payments and a few additional things as well. What are the other regulatory items on the table that you could see changing aside from just the ownership cap?

For those less familiar with the setup for virtual MVPDs currently versus traditional pay, can you just walk through what that dynamic looks like today and what it would mean for you guys if that change occurs?

So what could that mean for your economics if that change is made?

And then the last piece here, I believe Simington had put out an op-ed at one point discussing a potential cap on reverse comp payments as well. He'll be leaving so not sure how much of that stands, but any thoughts around that and how likely a scenario that might actually be?

I think it was a little unclear. I've never seen Carr come out and talk about that. So, it's a little unclear to me what his position is on it, but again, he's certainly been aggressive about support for local broadcast and feeling like the networks are monopolizing our business. So, I think we're optimistic that that could go forward. I think what Jason said about ownership cap as a priority is right.

That makes sense. And then you discussed some other potential non-core asset sales publicly in the past. I think we touched on them last year when you guys were here. Can you just quickly highlight the progress that has been made there and any other elements that could help accelerate financial flexibility for you guys?

And last point on that, I believe at one point the company had put your Bounce network up for sale and that's kind of been put on the back burner at this point. Can you just talk about thoughts around selling that moving forward or holding on to it and any of the other national networks as well?

There was some commentary from, I'm not sure if it was you or your peers on the most recent set of earnings calls, that swaps and other deals like that could probably start happening before we see actual changes to the regulations. Do you anticipate that that could be a factor?

That's helpful. Hoping to discuss the company's expansion into sports programming with Scripps Sports and your approach to live sports moving forward both on the local and the national side. And then if you could just touch on your view of the collapse of the RSN model and how things will play out in that ecosystem from here.

Wow, that's significant. And then MLB rights, there's been a lot of discussion in the press about what might happen here. How do you anticipate things will shake out there? And you're talking sort of rights versus your view on local rights.

Yeah, we'll have to see. And then could you remind us of Scripps' exposure to local versus national core advertising and then talk a little bit about what you're seeing in advertising in general locally and nationally, touching on any core ad categories that are impactful at this point.

Sure. I'll take that one, Hannah. So in our local division, about 70% is from local businesses of our core advertising and about 30% comes from national businesses that want to buy specific geographies. And then in our national network side, which is a little bit of a differentiator from some of the broadcast peers, it's all general market scatter, upfront advertising, direct response. We tend to skew heavily toward direct response because of our multicast networks. In terms of what we've been seeing, it's been a tough environment. I was at an ad panel yesterday, all the big agencies over here on 42nd, and they were somber about going into the upfront and what that looks like. Certainly the tariff commentary and uncertainty. They talked a lot about consumer confidence and lack of consumer confidence. Today we had a headline out of Cincinnati, actually where we live, that Procter & Gamble's planning to lay off 7,000 people over the next two years because of uncertainty about pricing, tariffs, and consumer behavior. So all of those are sort of the bad headlines right now. On the core local side, we're faring a little better. The local businesses that are less impacted in some cases by tariffs have been holding steady. We were down about 3% in the first quarter. Looking at the same range for the second quarter, but we had guided to down low single digits. Auto continues to be weak and certainly that's one that both on the national and the local dealer level you're going to see impact of the economic commentary out of Washington, etc. Retail hasn't been great. On the other hand, services, which is a big consumer discretionary category, has been okay. It's held pretty steady. And home improvement, thank heavens, people continue to want to fix up their homes even post-COVID, a lot of people working from home. So that's been a good story. The other things that are helping us, still talking on the local station side right now, is the sports and Jason talked about the success we've had with that. The Tampa Bay Lightning is our newest NHL team. That season will start again in October. So we'll start to see an uplift from that. We also have the Aces, the WNBA team in Las Vegas, that's starting last month in May. So we hope to get a little uplift from that. Haven't guided that in really. Just have seen with other local teams that we've done a nice boost in core in those regions. And then the Pacers, which I have no idea where that stands right now. Starts tonight. We all are rooting for a game seven. Yes, please. Yes, that'll help us. We are the ABC in Indianapolis. So we've seen like nice money laying in because of that. And even though there's been expectations that the viewership won't be as good, we'll still benefit from that. So it'll be very strong in Indiana though. I can tell you that. Yes. We have an ABC in Indianapolis that we'll see benefit from that. So on the national side, again, sports is a great story for us. The WNBA, we're in our third season with them, working on the renewal, which is going very well for another few years ahead with them. And also the NWSL. So seeing really nice growth in both the rates we get for that inventory on ION. As you may remember, there's the Friday night franchise with the WNBA and the Saturday night franchise with the NWSL. And so, really pleased with those. And did you mention the two new franchises we're doing? I did. Yeah. Okay. So those in the fall when we don't have those two seasons, we'll have a nice benefit from the new agreements we've made.

Yeah, that's helpful. Can you just let us know when we should expect to see the renewal announcement with the WNBA or timelines around that?

Soon, this summer before the end of the season, which ends late August, early September.

Yeah. And then touched a little bit on the national side of the local business. Anything else to comment on related to the national network side advertising that you're seeing in the DR marketplace?

DR has been a mixed bag. Again, that's a consumer, you know, it's a act now to spend category and advertisers love that immediate ROI that they see from it. I have to cheat and look at my notes unless you remember this specifically. I have it right here though. Let's see. In the first quarter, we were down in the high single digits, but we were seeing average unit rates up about 5%. In April, they were up in the 10% range. So that's positive. We don't guide to that specifically, but generally speaking it's been holding steady and we continue to, I think we guided to down low singles in national networks for Q2.

Great. We feel fortunate, as Jason said, that we were able to see the sports things coming especially with women and have formed a really great relationship with the WNBA and they really like that the over-the-air reach that we give them is a unique value proposition that has incrementally added to their audience. And so even though there's a lot of expensive sports rights out there and a lot of competition, we've carved out a niche that we believe we can maintain. And given the advertising marketplace right now, that guide of about flat was I would say a pretty extreme outlier to a lot of our peers.

Yeah, that's really helpful. We'll be hosting a sports panel later today during lunch and there's going to be some specific questions on women's sports since we know that's a really exciting area right now as well. And then just continuing the ads conversation, but focusing more on political. It's a focus area for many investors and the 2026 midterms will be coming up before we know it. Any commentary around political expectations for 2026 and then the next presidential cycle in 2028? How are you guys positioned to benefit?

So, in the 2024 presidential election, we of course did record advertising. We were up 30% over the last presidential election. We expect to continue to be the place that campaigns want to spend money because of the regional reach. It's very efficient dollars for them and it's also an engaged audience who watch our local news programs. So that sort of 50% range, getting about half of the total spend which continues to grow. So our share is stable and the pie continues to get bigger. That's a good story for local broadcasters. I don't have any, so for the midterms, obviously expect the Democrats to try to get their act together and really make a run for it in the Senate and the House. That will obviously mean good things for our spending in our markets. No predictions right now on specific markets yet.

Okay. I want to see if we have any audience questions. Mario has a question.

Thank you. That's a terrific update. You talked about perhaps selling $53 million of real estate. You have a shareholder that owns your preferred out of Omaha and there's a lot of financial engineering that you can do assuming we're now in October. You've done an extended contract under WNBA. You're looking into the election for 2026. You got greater clarity on local and would you take part of the sports business or ION public and look at accelerating your financial engineering? You can't dismiss that, Jason. You love doing these deals. You're thinking about everything.

Okay. Any other audience questions before I wrap up with a few more?

Go ahead. Yes. I was just going to make sure we had a chance to mention our connected TV strategy because I think people think of us as a linear television company and we've been really aggressive getting into streaming revenue. So that was a 42% increase in our revenue. It's over $100 million now. It was nothing a few years ago. So that continues to be a good growth area for us. We have a great leader of that business, very aggressive, and he's really helped us to claim our space in that industry despite the big wigs that tend to dominate it.

That's helpful. I guess what do you see as the primary areas of focus for SSP within CTV space right now?

Yeah. In terms of industry spending categories, I don't know. I mean, it's sort of all over the map. Our sales teams sell the CTV with other things. So we're selling it for sports, we're selling it to pharma companies, it's really across the board. Packages where they want a little of everything cross-platform.

That's helpful. And then just one more to kind of close the loop on the regulatory side of things. You mentioned ATSC 3.0 or NextGen TV, accelerating that transition could benefit you guys. You announced a JV with a few of your peers back in January, EdgeBeam. So how do you see ATSC 3.0 transforming local broadcasting and how are you thinking about monetization as well as the opportunities for you guys and the industry in particular?

Certainly, back to the regulatory piece, an important piece of ultimately having the success we want to have there is we need to have the 1.0 standard sunset and there's an ask out there by the NAB to do that. Do you have any sort of timelines around when you would expect that to really pick up?

Great. Any other audience questions? Don't think so. Is there anything else that you guys want to highlight before we hop off?

Okay. Thank you so much. Thank you both so much for coming in. We really appreciate it. It was great to have you. Thank you.