E.W. Scripps Company (SSP) is a diversified media enterprise that has been serving audiences and businesses through its portfolio of local television stations, national news and entertainment networks, and digital platforms. The company's rich history dates back to 1878 when Edward Willis "E.W." Scripps founded the Scripps newspaper chain. Over the decades, the company has evolved from its roots in print media to become a leading player in the rapidly changing media industry.
Business Overview E.W. Scripps was incorporated in 1922 and is headquartered in Cincinnati, Ohio. The company operates through three main business segments: Local Media, Scripps Networks, and Other. 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 like Scripps News and Court TV, as well as popular entertainment brands such as ION, Bounce, Grit, ION Mystery, ION Plus, and Laff. The Other segment aggregates the company's smaller operating segments.
The company's evolution from a newspaper publisher to a diversified media enterprise has been marked by significant milestones. In the 1940s, Scripps made its first foray into television broadcasting, acquiring and launching its initial local television stations. This move was pivotal in transforming the company from a print-focused organization to a multimedia conglomerate. Over the subsequent decades, Scripps continued to expand its television business, acquiring additional stations and developing robust local news operations.
As the media landscape shifted, Scripps demonstrated its adaptability by making strategic investments in digital media during the 2000s. The company launched new online platforms and acquired digital media properties to complement its traditional broadcast operations, ensuring its continued relevance in the digital age.
Scripps faced a significant challenge during the 2008 financial crisis, which had a substantial impact on its operations and financial performance. However, the company's resilience allowed it to weather this storm and emerge stronger. In the aftermath, Scripps focused on diversifying its revenue streams and investing in new technologies and platforms to stay ahead of industry trends.
Throughout its history, Scripps has maintained a commitment to quality journalism and innovative programming. This dedication, combined with its strategic diversification efforts, has enabled the company to navigate the evolving media landscape and maintain its position as a leading player in the industry.
Financial Performance Despite the challenges posed by the evolving media landscape, Scripps has demonstrated resilience in its financial performance. In the most recent fiscal year, the company reported total revenue of $2.29 billion. However, the company faced a significant net loss of $947.78 million for the year, largely due to non-cash impairment charges. Operating cash flow for the year stood at $111.60 million, while free cash flow was $51.98 million.
In the most recent quarter, Scripps showed signs of improvement. The company reported quarterly revenue of $646.30 million, representing a year-over-year growth of 14.1%. This increase was primarily driven by a record amount of political advertising revenue, which increased $116 million compared to the prior year quarter. However, this was partially offset by a $13 million or 9.2% decrease in core advertising revenue, which was impacted by significant advertising displacement in several key markets. Net income for the quarter stood at $47.78 million, marking a significant turnaround from the previous year's losses.
The company's performance varied across its different segments. In the third quarter of 2024, the Local Media segment saw revenues increase by 26.2% to $445.55 million, driven by a $116 million increase in political advertising revenues. Segment profit for Local Media increased by 115% to $160.69 million. Conversely, the Scripps Networks segment experienced a 6.4% decrease in revenues to $201.67 million, partly due to lower ratings in key demographics. Segment profit for Scripps Networks decreased by 15.3% to $42.06 million.
Liquidity Scripps maintains a solid liquidity position, with $34.64 million in cash and cash equivalents as of September 30, 2024. The company also has $403 million of additional borrowing capacity under its $585 million revolving credit facility. In July 2023, Scripps entered into the Eighth Amendment to its credit agreement, which extended the maturity of the revolving credit facility to January 2026.
The company's debt-to-equity ratio stands at 2.35, while both its current ratio and quick ratio are 1.34. These metrics suggest that Scripps has adequate liquidity to meet its short-term obligations and fund its operations.
Scripps has been actively managing its debt, paying down $115 million in the third quarter of 2024. The company expects to apply nearly $300 million to debt paydown by the end of 2024, leveraging the influx of political ad revenue. As a result, Scripps' leverage ratio improved from 6x at the end of Q2 2024 to 5.1x at the end of Q3 2024, with expectations to further deleverage to the high 4x range by the end of 2024.
Operational Highlights One of Scripps' key strategic priorities has been to leverage its portfolio of local television stations and national networks to capitalize on the growing demand for live sports and news content. The company has secured rights to air various professional and collegiate sports leagues, including the National Women's Soccer League (NWSL) and the Big Sky Conference, which have helped drive engagement and monetization opportunities.
Additionally, Scripps has been actively managing its cost structure, with the recent announcement of a scaled-back Scripps News operation expected to generate $35 million in annualized net savings starting in 2025. The company has also been exploring opportunities to divest non-core assets, such as the potential sale of its Bounce multi-cast television network, in order to focus on its higher-growth and more profitable business segments.
Navigating Industry Challenges The media industry has been facing significant disruption, with the rise of streaming platforms and the ongoing shift in consumer viewing habits. Scripps has been proactive in adapting to these changes, expanding its presence in the connected TV (CTV) space and exploring new revenue streams, such as increased monetization of its sports programming.
Despite these challenges, Scripps remains committed to its transformation plan, which aims to improve financial performance, reduce debt, and position the company for future growth. The company's strategic initiatives, including its focus on live sports and news content, cost optimization, and selective portfolio management, are designed to enhance shareholder value and ensure Scripps' long-term competitiveness in the evolving media landscape.
Risks and Outlook While Scripps has demonstrated its ability to navigate the industry's complexities, the company faces several risks that investors should consider. These include heightened competition from tech-savvy media giants, potential regulatory changes that could impact the broadcast industry, and ongoing shifts in consumer preferences and media consumption habits.
Looking ahead, Scripps' management has provided guidance for the fourth quarter of 2024. The company expects Local Media division revenue to be up in the low to mid-30% range, while core ad revenue is anticipated to be down in the low-double-digit percent range. Local Media expenses are projected to increase in the mid-single-digit percent range. For the Scripps Networks division, Q4 2024 revenue is expected to decrease in the mid-single-digit percent range, with expenses down in the high-single-digit percent range. Notably, Scripps anticipates a meaningful 400 to 600 basis point improvement in Scripps Networks margins in 2025.
The broader industry outlook remains positive, with the global broadcasting and cable TV market size estimated at $356.45 billion in 2024 and projected to grow at a CAGR of 4% from 2025 to 2030, reaching $449.91 billion. This growth is driven by the increasing demand for on-demand and live content, fueled by the rise in digital consumption and global connectivity.
Conclusion E.W. Scripps Company has a rich history and a proven track record of adapting to the ever-changing media landscape. Through strategic acquisitions, cost optimization, and a focus on high-growth segments like live sports and news content, the company is positioning itself for long-term success. While challenges remain, Scripps' commitment to its transformation plan, strong financial position, and strategic focus on deleveraging suggest that the company is well-equipped to navigate the industry's complexities and capitalize on emerging opportunities. As Scripps continues to execute its strategy and adapt to market trends, investors will be watching closely to see how the company evolves in the dynamic media landscape.