The E.W. Scripps Company (NASDAQ: SSP) delivered $566 million in total revenue and $115 million of segment profit for the first quarter of 2022, as high sales execution and disciplined expense control across the company produced another quarter of solid operating results.
The company is on track to deliver free cash flow of $400–$450 million for the full year, aided by a projected $270 million of political advertising revenue, which would be an increase of about 40% from the last mid-term election year, 2018. The company’s continued strong operating performance has helped speed its path to de-levering, and debt leverage is now estimated to decrease by year end to around 4.0x.
- Scripps’ Local Media division produced 3.4% growth in Q1 core advertising revenue, as it again brought in more than 1,000 new-to-TV advertisers. The services and home improvement categories were double-digit growers in the quarter.
- Despite the national advertising climate, the nine Scripps Networks delivered an 8.5% increase in adjusted combined revenue over Q1 2021 – a best-in-class performance within its national cable and broadcast networks marketplace.
- On April 1, Scripps received a debt ratings upgrade from Moody’s, which followed an upgrade from S&P in November. The two upgrades will decrease the company’s interest expense in future periods.
- During the first quarter, Scripps redeemed $123 million of the outstanding principal balance on its senior notes. The redemptions resulted in a gain on extinguishment of debt of $1.2 million.
“Once again in the first quarter, Scripps delivered outstanding financial results, despite the macro-economic environment. We carried our 2021 momentum into this year, with superb sales execution as well as a disciplined approach to expenditures across the company, resulting in significant ad sales growth and strong segment profit,” said Scripps President and CEO Adam Symson.
“In Local Media, our focus on winning new-to-TV advertising dollars fueled double-digit growth in key core advertising categories. In addition, pay TV subscriber growth contributed to the segment’s stellar top-line performance of mid-single-digit total revenue growth, even exceeding our expectations for low single digits. Local Media’s strong start provides a springboard for the rest of the year as we anticipate a robust mid-term political revenue cycle.
“Our Scripps Networks division performed at the top of its peer set of large national broadcast and cable networks portfolios in revenue and audience. The Scripps Networks ratings grew 5% in total viewers in prime time, propelled by our leadership in growing the over-the-air marketplace. Among the standouts was Bounce, our African American focused network, which has seen significant ratings and revenue growth in concert with some changes to our programming lineup. And despite the recent national advertising climate, Networks grew revenue 8.5% and produced a 36% profit margin.
“The Scripps strategy around free, ad-supported television is resonating with consumers as they gravitate toward simplicity, savings and efficiency. Recent reports from Nielsen, Kantar and Horowitz Research all found fatigue with the cost and complexity of navigating plus-services, and we believe free, over-the-air television and other free, ad-supported platforms are the solutions they are seeking. Inflation, the consumers’ plus fatigue, subscription video on demand (SVOD) subscriber churn and Wall Street’s recent reckoning with the SVOD model all work in our favor.”
Total first-quarter company revenue was $566 million, an increase of 4.6% or $24.8 million from the prior-year quarter. Revenues benefited from higher core, political and retransmission revenue in our Local Media division and overall growth in our Scripps Networks operations.
Costs and expenses for segments, shared services and corporate were $451 million, up from $408 million in the year-ago quarter.
Income attributable to the shareholders of Scripps was $9.8 million or 10 cents per share. Pre-tax costs for the quarter included $1.6 million of acquisition and related integration costs as well as a $1.2 million gain on extinguishment of debt from the redemption of senior notes. In the prior-year quarter, loss from continuing operations attributable to the shareholders of Scripps was $8.1 million or 10 cents per share. The prior-year quarter included an $81.8 million gain from the sale of Triton, a $67.2 million non-cash adjustment due to the increase in the fair value of the outstanding common stock warrant liability, acquisition and related integration costs of $28.6 million and $7.1 million of restructuring costs. These items decreased income from continuing operations by $29.3 million, net of taxes, or 36 cents per share.
Revenue from Local Media was $327 million, up 4.5% from the prior-year quarter.
Core advertising revenue increased 3.4% to $157 million.
Political revenue was $5.8 million, compared to $1.3 million in the prior-year quarter.
Retransmission revenue increased 2.5% to $160 million.
Segment expenses increased 6.1% to $272 million, driven by network affiliation fees and the impact of Scripps employees returning to working in its stations, resuming more normal operating procedures.
Segment profit was $54.4 million, compared to $55.9 million in the year-ago quarter.
Revenue from Scripps Networks was $239 million, up 12% from the prior-year quarter. Revenue in the first quarter of 2022 reflects incremental ad revenue earned from the July 2021 launch of Defy TV and TrueReal networks and the acquisition of ION, which closed Jan. 7, 2021.
Segment expenses for Scripps Networks increased 27% to $154 million. The increase reflects costs attributed to our recent over-the-air network launches, continued investment in programming and higher costs tied to revenue growth.
Segment profit was $85.1 million, compared to $92.2 million in the year-ago quarter.
On March 31, cash and cash equivalents totaled $35 million and total debt was $3.2 billion, including $75 million outstanding under our revolving credit facility.
During the first quarter of 2022, we redeemed a total of $123 million of the outstanding principal on our senior notes. In addition, we made mandatory principal payments of $4.7 million on our term loans.
Preferred stock dividends paid in the first quarter were $12 million. Under the terms of Berkshire Hathaway’s preferred equity investment in Scripps, we are prohibited from paying dividends on or repurchasing our common shares until all preferred shares are redeemed.
