Executive Summary / Key Takeaways

• The E.W. Scripps Company is executing a strategic transformation focused on aggressive debt reduction and operational efficiency, highlighted by the recent successful refinancing of significant term loans and revolving credit facilities, extending maturities and improving the balance sheet.
• Despite macroeconomic headwinds impacting core advertising, the company's Local Media segment benefits from strong political advertising in election years and strategic investments in local sports rights, which also drive advertising yield.
• The Scripps Networks segment is undergoing a significant margin expansion driven by aggressive expense management, particularly following the restructuring of Scripps News, complemented by strong growth in Connected TV revenue and strategic investments in high-demand live sports like women's basketball and soccer.
• Regulatory changes at the FCC present a potential catalyst for future growth and operating leverage through industry consolidation and potentially improved terms with virtual MVPDs, building upon the company's deep local and national relationships.
• While challenges remain, including subscriber declines in traditional distribution and advertising market volatility, the company's focus on deleveraging, operational efficiency, and leveraging its broadcast spectrum and sports strategy positions it for potential value creation.

The Evolving Landscape of Local and National Media

The E.W. Scripps Company, a media enterprise with roots stretching back to 1878, stands at a pivotal juncture in the rapidly transforming media landscape. Known for its long-standing motto, "Give light and the people will find their own way," Scripps has adapted from its historical print origins to become a diversified player in television broadcasting and national networks. Its core business is segmented into Local Media, encompassing over 60 television stations across more than 40 markets, and Scripps Networks, featuring national news outlets and entertainment brands like ION, Bounce, and Court TV. The company also maintains a digital presence across various platforms and is the steward of the Scripps National Spelling Bee.

Scripps operates within a highly competitive environment, facing rivals across its business segments. In local broadcasting, it competes directly with major station groups like TEGNA (TGNA), Sinclair Broadcast Group (SBGI), and Nexstar Media Group (NXST). These competitors often boast larger station portfolios, which can translate into scale advantages in areas like content licensing and operational efficiency. For instance, Sinclair's scale appears to result in lower operating costs per unit compared to Scripps. In the national network space, Scripps' ION and other entertainment brands compete with a wide array of cable networks and, increasingly, with the national broadcast offerings of diversified media giants like Fox Corporation (FOXA), which benefit from dominant positions in news and sports and advanced digital platforms.

Beyond traditional broadcasters, the competitive landscape is heavily influenced by indirect competitors like streaming services (e.g., Netflix) and digital platforms (e.g., YouTube). These players are rapidly capturing audience attention and advertising spend, eroding the traditional television viewership base and forcing all broadcasters, including Scripps and its direct peers, to adapt their strategies and invest in digital and connected TV capabilities. While Scripps holds an estimated 5% aggregate market share in U.S. broadcasting, its growth trajectory has lagged the broader industry and some competitors, and its operating margins (TTM operating margin of 16.07%) trail those of larger rivals like FOXA (TTM operating margin of 18%) and NXST (TTM operating margin of 23%). This highlights challenges in achieving scale efficiencies and digital monetization compared to some peers.

However, Scripps possesses distinct competitive advantages. Its deep local roots and commitment to local journalism have earned it credibility and audience loyalty, evidenced by recent prestigious journalism awards for its news teams. Its national networks, particularly ION, benefit from ubiquitous distribution across over-the-air, cable, satellite, and connected TV platforms. Furthermore, Scripps is strategically leveraging its broadcast spectrum and embracing new technologies to carve out a differentiated position.

Leveraging Broadcast Spectrum and Embracing ATSC 3.0

A key technological differentiator for Scripps lies in its extensive broadcast spectrum holdings and its proactive engagement with the ATSC 3.0 transmission standard. While specific quantitative performance metrics for its internal broadcast technology were not detailed, the company views its spectrum as a valuable asset and ATSC 3.0 as a catalyst for future growth beyond traditional broadcasting.

Scripps is a participant in EdgeBeam Wireless, LLC, a joint venture with other major broadcasters (Gray Media (GTN), Nexstar Media Group, Inc., and Sinclair, Inc.). This initiative aims to leverage the uniquely efficient network architecture of broadcast and the ATSC 3.0 standard to provide expansive, reliable, and secure data delivery services. Scripps has committed $12.8 million for a 25% ownership interest in this venture, with $6.4 million contributed in Q1 2025. The stated goal of EdgeBeam is to create a spectrum footprint capable of nationwide coverage for data delivery, unlocking the potential of ATSC 3.0 for various applications.

For investors, the "so what" of this technological focus is the potential for new revenue streams and enhanced utilization of existing assets. ATSC 3.0 enables capabilities like datacasting, which could open doors to serving industries requiring efficient, one-to-many data transmission. While management indicated it is too early to model material revenue from EdgeBeam in 2025, they are bullish on the long-term opportunity for both equity value creation through the joint venture and commercial agreements for the use of their spectrum for data casting. This strategic move positions Scripps to potentially capitalize on the evolving digital landscape and diversify its revenue base beyond traditional advertising and retransmission fees, offering a technological moat that differentiates it from competitors less invested in this specific broadcast innovation.

Operational Performance and Strategic Execution

Scripps' recent financial performance reflects the dynamics of its core businesses and the impact of its strategic transformation efforts. In the first quarter of 2025, the company reported total operating revenues of $524.39 million, a decrease of 6.6% compared to $561.46 million in Q1 2024. This decline was primarily driven by decreases in core advertising (-$11.2 million), political revenue (-$12.7 million), and distribution revenue (-$13.6 million).

The Local Media segment, the largest contributor to revenue, saw its operating revenues decrease by 7.8% to $325.39 million in Q1 2025 from $352.84 million in the prior year quarter. This was impacted by a $11.9 million decrease in political revenue in this non-election year quarter, a 5.2% decrease in distribution revenues due to mid-single-digit subscriber declines, and a 3.1% decrease in core advertising revenues, reflecting broader economic uncertainty and hesitance in spending, particularly in automotive and retail categories. Despite the revenue pressure, Local Media expenses increased by only 1.1%, partly due to savings from restructuring efforts, although programming expenses rose by 6.8% driven by new sports rights agreements. Segment profit for Local Media consequently fell significantly, from $65.56 million in Q1 2024 to $34.92 million in Q1 2025.

In contrast, the Scripps Networks segment demonstrated notable operational improvement despite a 5.4% revenue decrease to $198.01 million in Q1 2025. This revenue decline was attributed to lower ratings in key demographics, partially offset by strong 42% growth in Connected TV revenue. The significant story here was the aggressive expense management, with total segment costs and expenses decreasing by 16.1%. Employee compensation and benefits decreased by over 30%, driven by savings from the scaling back of Scripps News over-the-air broadcast and other restructuring initiatives. Programming expense also decreased by 14.3%. This disciplined cost control led to a substantial increase in segment profit, from $49.65 million in Q1 2024 to $64.09 million in Q1 2025, resulting in a segment margin of 32%, the highest since Q4 2022. Management expects to achieve the high end of their previously guided 400-600 basis point margin improvement for the Networks segment in the first half of 2025.

The company's strategic pivot towards live sports, particularly women's sports, is gaining traction. Partnerships with the WNBA (Las Vegas Aces, NWSL on ION) and new properties like the SI women's games and the Fort Myers Tip-Off are not only driving viewership but also commanding premium advertising rates, helping to offset weakness in other advertising categories and contributing to the Networks' ability to outperform peers in ad revenue trends.

Strengthening the Balance Sheet

A central pillar of Scripps' current strategy is aggressive debt reduction and balance sheet improvement. The company has made significant progress on this front. Net leverage decreased from 6.0x at the end of Q2 2024 to 4.8x by the end of 2024, primarily driven by strong political advertising cash flow and expense management.

This deleveraging momentum culminated in the completion of a series of significant refinancing transactions on April 10, 2025. These transactions refinanced approximately $110.8 million of existing 2026 term loans and $540.2 million of existing 2028 term loans, extending maturities to 2028 and 2029. The existing revolving credit facility was replaced with new facilities totaling $278 million, maturing in July 2027 and January 2026. Additionally, the company entered into a new three-year accounts receivable securitization facility with aggregate commitments of up to $450 million, drawing approximately $362 million at closing to repay a portion of the 2026 term loan.

Following these transactions, no amounts remained outstanding on the prior 2026 and 2028 term loans or the old revolving credit facility. The refinancing extended the maturity profile for a significant portion of the company's debt, providing a clearer runway through mid-2027. While the blended cost of debt increased by less than 1% despite the elevated rate environment, the transactions successfully addressed approximately $1.5 billion of debt maturities.

Debt and leverage reduction remain the highest capital allocation priority. The company intends to use free cash flow to continue paying down debt and expects to further reduce its leverage ratio in 2025. The deferral of preferred stock dividends also provides financial flexibility for deleveraging, although it prohibits common stock dividends and repurchases until the preferred shares are redeemed. The company maintains a debt repurchase authorization of up to $500 million aggregate principal amount expiring in March 2026.

Outlook and Future Catalysts

Management's outlook reflects a cautious but strategically focused approach. For the second quarter of 2025, Local Media revenue is guided to be down in the high single-digit range, with core revenue down low single-digits, citing continued uncertainty related to tariffs. Local Media expenses are expected to be up low single-digits, driven primarily by sports programming costs.

The Scripps Networks segment is expected to see revenue about flat in Q2 2025, with expenses guided down in the low double-digit range due to aggressive expense management. This reinforces the focus on margin improvement in this segment. Retransmission revenue is expected to be flat year over year in Q2 2025 and for the full year, reflecting ongoing subscriber declines offset by contractual rate increases.

Beyond the near-term guidance, several potential catalysts could drive future value. The prospect of local broadcast industry consolidation, facilitated by potential regulatory relief from the FCC, is seen as a significant opportunity. Management believes greater scale and in-market depth are necessary to compete effectively and could allow for enhanced investment in local journalism and operational efficiencies. The FCC's apparent recognition of the need to rebalance the marketplace, potentially including how virtual MVPDs are treated, could provide more operating leverage for broadcasters like Scripps.

Further asset divestitures, such as the ongoing process to sell the Bounce TV network and additional real estate holdings, could provide further cash for debt reduction. The EdgeBeam joint venture, while early stage, represents a long-term opportunity to monetize broadcast spectrum through new data delivery services leveraging ATSC 3.0.

Risks and Challenges

Despite the strategic progress, Scripps faces several pertinent risks. Macroeconomic uncertainty, including concerns about tariffs, inflation, and recession, continues to weigh on advertising spending, particularly in core categories like automotive and retail, impacting both Local Media and Scripps Networks revenues. The ongoing trend of subscriber declines in traditional cable and satellite distribution unfavorably impacts retransmission revenues, a key revenue stream for the Local Media segment.

Competition remains intense across all segments, with larger, more diversified media companies and digital platforms posing significant challenges. Outdated government regulations are perceived as hindering the company's ability to compete effectively and pursue necessary consolidation. While the refinancing has extended maturities, the company still carries a significant debt load, and its leverage ratio, while improving, remains a key focus area. Changes in interest rates could impact the cost of its variable-rate debt.

The fair value of the Scripps Networks reporting unit currently approximates its carrying value, making it sensitive to changes in assumptions regarding its future performance and discount rates, potentially leading to future goodwill impairment charges.

Conclusion

The E.W. Scripps Company is actively engaged in a strategic transformation aimed at enhancing its financial durability and positioning itself for future growth in a dynamic media environment. The successful completion of significant debt refinancing transactions marks a critical milestone in its aggressive deleveraging plan, extending maturities and providing a more stable financial foundation.

Operationally, the company is driving margin expansion in its Networks segment through disciplined expense management and leveraging strategic investments in high-demand live sports and Connected TV growth. While the Local Media segment faces headwinds from macroeconomic uncertainty and traditional distribution declines, it benefits from the cyclical strength of political advertising and the yield generated by local sports rights.

Looking ahead, potential regulatory changes could unlock significant opportunities for industry consolidation and improved competitive positioning. While risks related to advertising market volatility, subscriber trends, and debt levels persist, Scripps' clear focus on debt reduction, operational efficiency, and capitalizing on its broadcast spectrum and sports strategy provides a compelling narrative for investors monitoring its progress in navigating the evolving media landscape.