According to analysts polled by Zacks Equity Research, The E.W. Scripps Co. — a much bigger operation today than a year ago thanks to its merger with Ion Media — was expected to post earnings per share of $0.12 in Q3. That would have reflected an 84.2% year-over-year decline, impacted by fewer political ad dollars.
How did Scripps do?
Much better than those prognostications, thank you. But, it is hardly because of the company’s Local Media unit.
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While there was a net income decline from Q3 2020, it wasn’t as severe as Wall Street thought it would be for Scripps. The broadcast television company, which divested all of its radio assets and is today a visual media-focused entity, saw its net income move to $46.12 million ($0.50 per diluted share) from $58.52 million ($0.69).
The better-than-forecast Q3 EPS was fueled by a revenue jump to $555.24 million, from $493.26 million. Zacks’ revenue forecast for the third quarter of 2021 was $546.8 million.
For investors, there was early excitement on Wall Street, with SSP up by 3.8% as of 10:12am Eastern, to $21.41 per share. It reflects a year-long growth trend, as SSP was priced at $14.74 on January 18.
Looking at Scripps’ Q3 on a segment-by-segment basis, however, yields a somewhat disconcerting reality for the company: Scripps Networks, comprised of digital multicast networks Newsy, Court TV, Court TV Mystery, ION, Bounce, Laff, Grit, Defy TV and TrueReal, fueled the revenue gain. This is largely thanks to the Ion deal, as year-over-year comparisons are not on a same-asset basis.
In Q3 2021, the Scripps Networks accounted for $226.55 million in revenue; a smaller unit in Q3 2020 contributed $72.83 million to the bottom line.
A LOCAL MEDIA EX-POLITICAL SLIP
For the unit that includes broadcast TV stations such as WPTV-5 in West Palm Beach, WXYZ-7 in Detroit, and flagship property WCPO-9 in Cincinnati, Ohio, a bumpy quarter was seen for Scripps when one looks plainly at the results.
Local Media revenue in Q3 2021 declined to $331.32 million, from $407 million. Segment profit shrunk to $65.39 million, from $147.79 million.
While that may appear to be disappointing, investors must take into consideration the enormous political ad dollar windfall experienced by broadcast media in Q3 2020. As such, a decline was all but inevitable for Scripps, and for its peers. Political revenue was $7.1 million, compared to $96.4 million in Q3 2020.
Importantly, core advertising revenue increased 10%, to $167 million. Furthermore, Local Media core advertising in Q3 surpassed Scripps’ third-quarter 2019 levels, driven by “significant new business, demand for our connected TV advertising products and the rise of the sports betting category,” the company said ahead of a 9:30am Eastern conference call for analysts and shareholders.
Sports betting has proven to be a big growth category for Scripps peers, too, as noted in multiple Q3 2021 earnings calls across the week. For Scripps, its belief in the power of sports wagering is coupled by a love for eSports — an area in which Beasley Media Group and Gray Television have placed their dollars. For Scripps, a $10 million investment in esports company Misfits Gaming Group was announced in late September.
Lastly, Scripps’ financial condition shows that as of September 30, cash and cash equivalents totaled $106.5 million. That amount includes $34.3 million in proceeds from the sale of the building housing its KMGH-7 in Denver, funds that are restricted until January 2022.
Total debt was $3.3 billion.
AUTO SMOOTH ON LOCAL LEVEL
Answering a query from Michael Kupinski at Boca Raton, Fla.-based Noble Capital Markets, Local Media head Brian Lawlor noted that when it comes to automotive dollars, the activity from individual dealers is still quite strong. “We’re not too far from flat,” Lawlor told Kupinski.
Indeed, as stations including WPTV-5 have seen plenty of commercials from Palm Beach County auto dealerships. Where the slow down is seen is from dealer groups — the activity largely seen in the Media Monitors Spot Ten TV reports published each Monday by RBR+TVBR — and from manufacturers themselves.
This slow down is expected to endure through the first half of 2022. But, Lawlor notes that this varies by brand.
SPORTS BETTING: A BIG GROWTH CATEGORY FOR BROADCAST MEDIA
“I just think is the beginning,” Scripps CEO Adam Symson said during the company’s earnings call, in response to an analyst’s inquiry into growth opportunities for the company.
Scripps, like its peers, is encouraged by the category’s potential. But, Symson says it will likely be two years until growth is fully realized.
