The E.W. Scripps Company (SSP) Adam Symson, President & CEO - Gabelli 18th Sports & Media Symposium

Thank you, Hannah. Thanks for having us.

Yeah, so we have been in and out of all sorts of media over our long history. Obviously going all the way back to when we were one of the nation's largest newspaper publishers. We were a cable operator. We were also a cable programmer, launching HGTV and the Food Network, and we have been in and out of radio and podcasting. We no longer have any newspapers. Today, we are mostly television and associated digital properties. When we think about this moment in time, our focus today is on yielding the benefits of our reach and we are going through what we sort of characterized as a refounding of the company. As a result of structural factors with our industry, particularly local television, we have been in a mode of consolidation. That means that through that consolidation, we have been bolting on other TV stations. I would argue nobody in the industry has ever stepped back through digital revolution and said, are we actually producing a product that meets the customer and the consumer where they are, and have we actually taken advantage of some of the technology available to us now to really upend the way we do things? At this moment when our industry is totally obsessed with financial engineering, which I am a big fan of and definitely want to take advantage of, I would also say we are focused on a transformation plan that will improve EBITDA by between $125 and $150 million. That is about a 30% lift between now and 2028. We are exactly on track to execute against that and I am feeling very good about the results.

Yeah, so I would say we are looking at the use of technology, AI, and automation in both the front office and the back office. I will sort of put the back office to the side because I think there is not very much different about our back office from any company's back office. And I will tell you, at the end of the day, the industry has been held back by its unwillingness to actually focus on the customer, the consumer. That means that we are still producing a newscast for 5:00 and 6:00 when the audience is no longer tuning in exclusively for news at 5:00 and 6:00. So what we have done is we have engineered a way, starting a couple of years ago, to begin to eliminate the front office functions that are not apparent to the customer, to our audience, and really focus our resources on the folks that produce the journalism in the field and the folks that actually do the selling of the advertising on Main Street. Everything else in between has really been up for grabs. That has opened up the opportunity for us to build out technology that changes the way we deliver the news and therefore will generate a significant amount of the savings through the use of technology while also actually improving our focus on the customer.

Great guy.

So, I mean, by virtue of some of the things that he has already approved on waivers, I think we have a really good sense as to where the rules are going to end up. I believe that ultimately the prohibition against owning two big fours in a market, as ruled by the Eighth Circuit Court, will be codified into law, and I think ultimately the chairman will see fit to significantly raise or eliminate the cap based on, you know, ultimately even the FCC and the DOJ's approval of the Nexstar deal. From our perspective, we have already been very focused on doing everything we can to ensure we get as deep as possible with big fours and independents in the markets where we operate. So ideally, I would like to see us with two big fours in a market and potentially an independent where we would be running sports. That is a little bit of a nuance or a difference from some of our peers because we have the ION portfolio, which gives us significant flexibility with how we use our broadcast licenses. And I believe the door is open for all that. So we have closed on a couple of swap transactions. We recently announced the acquisition of a second station in Lexington from Morris Communications that we are already running essentially as one station group. And the industrial logic for us to have two big fours in a market and then layering on top of that the power of a sports franchise creates the kind of durability that we are looking for from the regulatory environment.

I think there is significant opportunity on a couple of fronts. The first area is to continue with swaps that allow us to add second stations or third stations in markets where we already operate. The economic logic there is really significant. The other opportunity that is unique to us is the opportunity to take the ION portfolio and always think about the use of spectrum at its best and highest use. For example, in Las Vegas, a couple of years ago we had an ION station. A lot of people don't realize ION is not a cable network; it is actually the largest broadcast network in which we own all of the stations. We don't have affiliates. The opportunity was for us to say: are we better off using that ION stick to run ION, or should we move ION to the secondary channel, maintain its cable distribution and its reach, and take the first station and turn it into an independent station where we would then run the Vegas Golden Knights? That is what we have done now several times over. Most recently, we just announced a deal with the Nashville Predators. That will be our fifth NHL hockey team. You can see the power of the ability to expand our local footprint without actually deploying any additional capital. We don't have to buy new stations to pick up new network affiliates or new independents. That is what has been powering our core revenue growth. The core growth that we saw in the first quarter was up 7%. That was industry-leading because we are able to tap new markets by going to the sports marketplace and starting independent stations that our peers cannot do because they are tied in only with big four affiliations.

I am in favor of consolidation. I am in favor of smart consolidation. I think we are all sort of waiting to see what happens in the courts, and I don't have any special insight more than anybody else. I would say, for us, especially if there was going to be a stock deal and our shareholders were going to be invested in the success of the future enterprise, a lot of things have to be true. I think everybody in this room has lots of experience seeing transactions close and then the mergers fail dramatically as a result of different cultures, different governance structures. So for us and for our shareholders, it not only has to be the right price, it has to be the right governance structure. There is not much issue with any of the TV stations that Sinclair has or the hardworking people that work in those TV stations, but there is a dramatic difference between the ethos of our company and the ethos of Sinclair's leadership. Therefore, I think that was part of the issue relative to whether our investors or our shareholders were going to feel comfortable in a situation in which the value of their equity was potentially going to be tied up. It would be a very different case if there was a significant all-cash offer. At the same time, our board was very clear on what we were doing from a transformation perspective. We had not publicly announced our transformation, but increasing EBITDA by a third is going to have a dramatic impact on our share price. While it is not necessarily appearing in the equity today, if you do the math, you would clearly see that their offer of stock and cash was way too low. So from our perspective, our board was just simply looking out for the best interest of our shareholders. I do think scale is important. I think in-market depth is important, and we will continue to do what we need to do to put ourselves in the best position to participate in additional M&A that improves the operating performance of our business.

Yeah, sure. So in our local segment, we do local advertising and national advertising. About 70% of our local advertising would be considered local, like Main Street advertisers. And then 30% would be national advertisers that essentially buy locally. They are buying a selection of local markets; they may not be buying the entire country. So they are buying the top 25 markets and they are coming to the owners of TV stations in those top 25 markets. For us, the dynamic is a little different than our peers because of sports. When we began to acquire sports rights and acquire them at very efficient rates, we recognized that this was going to open up new opportunity for us not only to take share but also to bring in different kinds of advertisers that had not traditionally been spending on local television. So we have been seeing pretty significant local advertising growth on the back of the continued growth in sports. We typically see that in first quarter and fourth quarter. Second quarter has a little bit of playoff action but it is much lighter from a local sports perspective. After we announced first quarter results of up 7% in core, which was best-in-class, we also announced the acquisition of the Nashville Predators and of the Detroit Pistons. So as you start to think about fourth quarter, you are going to start to see our company put up core revenue that will demonstrate incremental organic and inorganic core revenue growth on the back of local and sports, in addition to what I expect to be a very, very good political year. And I think that is a big differentiator in our name.

Yeah, I mean, political, I would say it is going to be a record-setting year in political for the industry and for the amount of spend in general. Partisan politics and polarization makes for good political revenue, sadly or gladly. But ultimately, we are already beginning to see the strength in the political marketplace. I do expect to begin to see some more share going to connected TV here. Again, a little bit of a nuance or a difference between us and our peers. We are not only a political platform with respect to local advertising and broadcast, but we are also a political platform with respect to connected TV. Unlike our peers on the local side, we also have the Scripps Networks and all of our networks are in the FAST marketplace. Free ad-supported streaming television. In the FAST marketplace, we are already seeing significant interest in our inventory in local markets where we don't actually have local TV stations. So I expect to continue to see CTV growth, and this year that will include a nice bump in political. Our local broadcast portfolio is terrific, with a good host of gubernatorial and senatorial races as well as house races, and also down ballot exposure. I think we used to sort of look at down ballot exposure and wonder how important are house races, state house races and assembly races. The truth is they become very important in this country because gerrymandering has really created a new power dynamic in local government. So you are seeing national and state parties spending significantly to try and influence what the make of a state house looks like. On the sports side of things, yeah, we recognized early, both with ION, our broadcast platform, as well as in local, that the destruction of the RSN marketplace was going to be an opportunity for us, not to recreate RSNs, but to essentially go to like-minded owners and leagues and speak with them about the value of bringing their sports back to broadcast. Those of us that have been around for a while remember when baseball and basketball was only on broadcast, and then it went to cable. As cable has continued to decline in its reach, these owners have recognized that they were better off when they had more reach. The future is not going to be about exclusivity. It is not going to be cable or broadcast or streaming. The future is going to be about a combination of broadcast and streaming. So we have heavily focused on acquiring rights, being a very disciplined acquirer of those rights. We actually haven't lost any deals. We have walked away from deals where the owners have had fantastical views of what their rights are worth. From our perspective, this has to create value. We want them to understand that they will make more money in merchandise, they will make more money in hospitality, and they will make more money in ticket sales when they take advantage of our reach. So we really expect them to look at this very differently, and it has been working out really, really well for us.

You know, look, first and foremost, we believe things have to create value. So to me, we model every deal to be profitable and recognize that in some cases, we may be willing to take a hit to margin in order to expand the whole number we take for revenue in EBITDA. But at the end of the day, it is not a passion play. I like sports, but I am not a sports fanatic. So for me, this is not about the love of the genre. It is about recognizing that live sports is the most important genre as a programming vehicle for linear television. It is about recognizing, as we shifted our vision to 'we create connection,' live sports is the only thing in this country that brings people together. We are fractured along every line except if you walk around New York right now, everybody is rooting for the Knicks. Right. Okay. Knicks in four. Sorry, I am from Cincinnati where we have no dog in the hunt. So look, I think ultimately, we are experiencing the power of live sports. When I was growing up, linear television, electronic journalism was the thing that created the watercooler moment. It bound us together. We would spend time together, separately in our own homes, watching the same things, and then we would come to work the next day and talk about it. There was a shared experience. Today, that is not a factor anymore. Nobody comes to the office and says, 'Wow, did you stream the fourth episode of The Bear from two seasons ago?' That just doesn't work the same way. Sports is really it. So when we think about our vision to create connection, it is not creating connection between us and our consumer. It is about the role we can play to create connection for our consumers with each other, for our consumers with the brands that motivate their passions. Going all the way back to the history of this company, that is what this company has always been about. Recognizing that we have this incredible power through our platform to bring people together.

Yeah, I mean, again, those are two separate questions, so I will answer them both. On the NFL, I definitely think you are going to continue to see games or small packages broken off and put onto streaming, or incremental games created as they have done with international games and put onto streaming. Major packages that go to streaming, you can see what is in the NFL's mind. The Amazon Thursday Night Game: most people think it is gone to Thursday night, but they don't realize that Amazon is required to resell the game to a local broadcaster in the two home markets because the NFL knows that to black out those games permanently would not benefit the NFL. So they are very aware with their limited inventory that they have the power to have their cake and eat it too. I expect that we will see things continue to cleave in that direction. It is no secret that the NFL is going to try to maximize the value of their rights. I can tell you I expect programming fees to affiliates, or put differently reverse retransmission, to continue to go down. If you take a look at our results, you have already begun to see that first with the flattening, and then when you exclude our incremental sports rights that we actually pay for, you are seeing programming fees going down, and you are seeing net retransmission margin expansion. That is because the affiliates have really drawn a pretty hard line with the networks for them to recognize that they actually need us and our distribution as much as we need them. They have begun to build new businesses around us, and I don't begrudge them that. But we are certainly not going to pay fees that were once reserved for exclusive products when those products are no longer exclusive. So I would continue to expect, even if the NFL changes things, that we are going to continue to see programming fees go down for local affiliates.

Yeah. So the macro environment is very difficult in general. I think we are beginning to see finally the impact of the war in Iran in a way that we never actually saw with tariffs. With tariffs, we saw companies deciding on an ad hoc basis whether they would eat the margin or pass it on. With respect to gas prices, it is all being passed on to the consumer, and that means the consumer has a lot less to spend outside of the supermarket and the pump. Advertising is impacted by that as well, especially on the national side and the DR side in particular. So DR described how DR was a little soft. And the Nielsen methodology change doesn't necessarily help. I expect if we can find some sort of resolution in the Middle East and for gas prices to at least stabilize, to drive some of the uncertainty out of the environment, things will stabilize and be a lot better. The difference for us is sports. While I talked a lot about sports on the local side, we are also very focused on live sports on the network side. If you take a look at our performance compared to our general entertainment peers, live sports, particularly women's sports, has been the key defining feature. We recognized early, before Caitlin Clark, that live sports, women's sports deserved a home on the national stage. We began by dedicating a franchise night for the WNBA. Then we added the NWSL and more recently Major League Volleyball, PWHL, Athos, which is a track league. All of this live sports has been a driver or a catalyst for overperformance relative to our peers. That doesn't mean it is easy, and it is a little early to provide upfront commentary, but it is a tougher time in the national marketplace, and that is why we are constantly looking at making sure that we are really using our spectrum, our broadcast spectrum for its best and highest use.

Yeah, I mean the addressable market is huge, and it is specifically helpful to Scripps because we made a decision early on with all of our broadcast networks that, since we don't get paid by the cable operators, we can do whatever we want with them if we have the rights to the programming. So we negotiated for the rights to put them into the CTV marketplace. That built us a business from essentially nothing to about $125 million in revenue. I expect to continue to see growth there. I don't think it is going to grow at 40% forever, but it has been experiencing nice double-digit growth. As I mentioned before, we will see a little bit of contribution this year from political into our growth numbers with CTV. This is the direction the world is moving, and it helps that we are one of the very few programmers that have the rights to the kind of premium content in a network format that can negotiate for carriage with Samsung, Roku, and Pluto TV, and get great positioning. More recently, we launched the Scripps Sports Network, which is an opportunity for us to drive premium sports into the FAST marketplace. There is very little live sports in FAST because most live sports is carried on platforms that go to cable, which precludes them from being in FAST. So we have been able to take our network, Scripps Sports, and not only the rights we already have with the WNBA, NWSL, PWHL, and Major League Volleyball, but also acquire other very efficiently acquired rights and bring them to FAST. Right out of the gate, I think it is doing very well. From an advertiser perspective, advertisers recognize it is all about live sports and the ability for us to have more than a thousand hours of live sports a year on FAST has been a differentiator from an audience perspective as well as from an advertiser perspective.

Hannah, thank you for having us.