The E.W. Scripps Company (SSP) is a diversified media enterprise that has been a fixture in the American media landscape for over a century. Founded in 1878, Scripps has evolved from a regional newspaper publisher to a multi-faceted media conglomerate, with a portfolio that includes local television stations, national news and entertainment networks, and digital media properties.

Business Segments

Scripps' business is organized into two primary segments: Local Media and Scripps Networks. The Local Media segment includes more than 60 local television stations and their related digital operations, while the Scripps Networks segment encompasses national news outlets Scripps News and Court TV, as well as popular entertainment brands such as ION, Bounce, Grit, ION Mystery, ION Plus, and Laff.

The Local Media segment comprises 18 ABC affiliates, 11 NBC affiliates, 9 CBS affiliates, and 4 FOX affiliates. Scripps also operates 11 independent stations and 10 additional low power stations. This segment generates revenue primarily from the sale of advertising to local, national, and political advertisers, as well as retransmission fees received from cable operators, telecommunications companies, satellite carriers, and over-the-top virtual MVPDs.

The Scripps Networks segment's channels reach nearly every U.S. television home through free over-the-air broadcast, cable/satellite, connected TV, and digital distribution. This segment earns revenue primarily through the sale of advertising.

Historical Evolution

Over the years, Scripps has navigated the evolving media landscape through strategic acquisitions, divestitures, and a commitment to adapting to changing consumer preferences. The company's journey began with its founder, Edward Willis "E.W." Scripps, who launched the Cleveland Penny Press in 1878. Scripps quickly expanded his newspaper empire, establishing numerous daily and weekly publications across the Midwest and West Coast.

In 1987, Scripps made a significant pivot by entering the broadcast television industry with the acquisition of its first television station. This marked the beginning of a new era for the company, as it continued to expand its television station portfolio in the following decades. A major milestone came in 2008 when Scripps acquired the broadcast television division of the McGraw-Hill Companies, substantially increasing its local TV station footprint.

The 2010s saw Scripps further diversify its media offerings by launching its first national cable network, Bounce TV, in 2011. This was followed by the introduction of several additional national cable networks, including Grit and Escape. In 2017, Scripps made another strategic move by acquiring Katz Broadcasting, further strengthening its position in the national media landscape.

Throughout its history, Scripps has faced numerous challenges, including the decline of traditional print media and increased competition in the television industry. However, the company has demonstrated resilience by leveraging its diverse portfolio of media assets to adapt to industry changes and continue growing its business.

Financials

In 2023, Scripps reported total revenue of $2.29 billion. The company's net income for the year was a loss of $947.78 million, primarily due to a $952 million non-cash impairment charge related to the Scripps Networks reporting unit. Despite this one-time charge, Scripps' underlying business performance remained strong, with the company generating $111.60 million in operating cash flow and $51.98 million in free cash flow.

In the third quarter of 2024, Scripps reported revenue of $646.30 million, a 14.1% increase year-over-year, driven by a record level of political advertising revenue which more than offset a 9.2% decrease in core advertising revenue. Net income for the quarter was $47.78 million, with operating cash flow of $140.59 million and free cash flow of $127.44 million. The increase in operating cash flow and free cash flow was primarily due to the strong political advertising performance.

The company's Local Media segment has been a consistent driver of growth, with revenue increasing 26.2% in the third quarter of 2024 compared to the prior year period. This impressive performance was largely attributed to a $116 million increase in political advertising revenue. However, core advertising revenues decreased 9.2% due in part to displacement from political advertising. Local Media segment profit increased 114.3% in the third quarter compared to the prior year period.

The Scripps Networks segment, on the other hand, faced some challenges in 2024, with revenue decreasing 6.4% in the third quarter and 6.5% in the first nine months of 2024 compared to the prior year periods. Excluding the impact of a low-margin programmatic product that was sunset, Scripps Networks revenues decreased 5.3% and 4.5% in the quarter and year-to-date periods, respectively. Lower ratings in key monetized demographics and a decline in audience impressions delivered were the primary drivers of the revenue declines. Scripps Networks segment profit decreased 15.3% in the third quarter.

Liquidity

Scripps' financial position remains solid, with a diverse revenue mix and a strong balance sheet. As of the end of the third quarter of 2024, the company had $34.64 million in cash and cash equivalents. The company's debt-to-equity ratio stood at 2.26, with a current ratio and quick ratio both at 1.34.

Scripps has been actively working to reduce its debt burden. The company's leverage ratio has decreased from 6x at the end of Q2 to 5.1x at the end of Q3 2024. Scripps expects to continue deleveraging to the high 4x range by year-end and anticipates applying nearly $300 million to debt paydown by the end of 2024.

The company has access to a $585 million revolving credit facility, with $403 million available as of Q3 2024. This facility matures in January 2026 and has an interest rate based on SOFR plus a margin of 1.75% to 2.75% based on the company's leverage ratio.

Future Outlook

Looking ahead, Scripps remains focused on executing its strategic transformation plan, which includes maximizing its political advertising revenue opportunities, leveraging its commitment to live sports programming, and driving operational efficiencies across its businesses. The company has also been exploring strategic divestitures, such as the potential sale of its Bounce multi-cast television network, to further strengthen its balance sheet and position the company for long-term success.

For the fourth quarter of 2024, Scripps expects its Local Media division revenue to be up in the low to mid-30% range, while core advertising revenue is expected to be down in the low-double-digit percent range. Local Media expenses are anticipated to be up in the mid-single-digit percent range. For the Scripps Networks division, revenue is expected to be down in the mid-single-digit percent range, with expenses down in the high-single-digit percent range. The company anticipates a meaningful 400 to 600 basis point improvement in Scripps Networks margins in 2025.

Despite the challenges faced by the media industry as a whole, including the shift towards streaming services and the abandonment of traditional TV and radio, Scripps' diversified business model, strong brand portfolio, and experienced management team position the company well to navigate the evolving landscape. The company has evolved its business model to participate in the growing connected TV space and has focused on live sports programming, which has helped offset some of these industry challenges.

As Scripps continues to adapt and innovate, investors will be closely watching the company's progress in driving sustainable growth and enhancing shareholder value. The company's performance in political advertising cycles, which significantly impact revenue and profitability between even-numbered and odd-numbered years, will remain a key factor in its financial results.